South African fund manager steals millions in Bernie Madoff-type scheme

Craig Warriner used the BHI Trust to steal millions from his investors in a fraudulent scheme similar to what Bernie Madoff used to defraud clients.

Warriner handed himself over to police last week and appeared in the Palm Ridge Magistrates Court in Katlehong, where he represented himself.

Cawood Attorneys Incorporated published a letter which said Warriner confirmed that he would continue to represent himself.

He also confirmed that he waived his right to apply for bail and, therefore, remains in custody.

Warriner requested to be moved to a single cell as he has received death threats from fellow inmates.

He confirmed in open court that he wanted to plead guilty. He indicated that he would plead guilty to any charges brought against him.

This had been his approach from the outset. He wished for his guilty plea to be entered on the record and that sentencing procedures could be postponed to a later date.

Warriner stated that he could not understand why the matter needed to be postponed for further investigation.

The Magistrate explained that the matter is complex and that the prosecution needs to investigate further.

She added that Warriner cannot plead guilty until the state has finalised their investigations and all charges have been correctly formulated.

The letter from Cawood Attorneys said the financial livelihoods of hundreds, if not thousands, of investors are at risk. They proposed:

• The existing funds and assets of the Trust need to be protected with the court urgently appointing a trustee.
• Proceeding with an urgent application to provisionally sequestrate the BHI Trust to ensure that a provisional trustee is appointed to safeguard the existing funds and assets.
• The Master of the High Court can extend the trustee’s powers to enable them to apply for an urgent insolvency enquiry into the financial affairs of the Trust.
• This enquiry will provide a platform to subpoena all known persons and parties involved with the Trust.

Cawood Attorneys proposed the appointment of Olga Kotze from Kaapvaal Trust as the provisional trustee of the BHI Trust.

“Our firm also invested funds with the Trust. We will do our utmost to ensure that the events leading up to the current situation will be investigated as soon and as thoroughly as possible,” it said.

What happened at BHI Trust

Initial information points to Warriner using a Ponzi scheme structure for BHI Trust, essentially robbing Peter to pay Paul.

Unlike Madoff, which used oversized returns to attract investors, Warriner’s fund has reportedly shown average returns.

Biznews founder Alec Hogg reported that Warriner’s marketing message to his elite clientele was that he was an expert day trader who focused on two stocks – BHP Billiton and Anglo American.

He claimed to “understand their price movements so well that he was guaranteed to make small profits daily, which were immediately banked”.

Biznews said that the unregistered BHI Trust had a notional value of R3 billion, which has all disappeared.

Hogg added that “given the manner of his operations, the Trust may have substantial liabilities through debts or positions in the options or futures markets”.

What makes the situation particularly problematic is that it goes far further than only a group of people who have lost money.

Sasfin Securities’ David Shapiro explained that the case’s complexity means it will be difficult for those who have lost money to get it back.

Investors who have received distributions of any kind from Warriner over the last 15 years are also likely to have to give that money back.

This is the same as what happened in the Bernie Madoff case, where investors were forced to repay the proceeds of his crime.

The mess that all investors who trusted Warriner now find themselves in is exacerbated by his previous opulent lifestyle.

Biznews reported that Warriner drove a Ferrari, travelled long-distance on his own private jet, and donated generously to the St. Stithians private school.

The school’s sports science initiative at its Sandton campus is even named after him – the Craig Warriner High-Performance Centre.