Man who lost R6 million in SA Ponzi scheme explains how he was duped

An investor who lost R6 million through Craig Warriner’s BHI Trust explained that he was assured it was a safe investment by a close friend and a registered financial advisor.

Last week, it was revealed that Warriner used the BHI Trust to steal millions from investors in a fraudulent Ponzi scheme similar to what Bernie Madoff used to defraud clients.

Warriner handed himself over to police 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.

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

City Press reported that the investment scheme involved over 2,000 clients who invested over R3 billion.

It added that many investors trusted Warriner with their life savings, and many high-profile financial advisers placed large amounts into the scheme.

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.

How investors were duped

BizNews interviewed an investor who lost R6 million in the fraudulent scheme and chose to remain anonymous. 

This investor said he found out about the BHI Trust through a good friend, who had been invested in the Trust for many years and said that it was working well for him and his family. 

His financial adviser recommended investing in BHI and assured him that it was a safe investment. The adviser also invested his money and his family’s in the Trust. 

The investor claimed that the BHI Trust was registered with the FSCA along with many other asset management companies with funds in the Trust. 

The investor’s funds were held in a JSE Trust Account with a JSE-registered broker, according to documentation seen by BizNews. 

However, the FSCA said in a statement that neither BHI Trust nor Warriner are authorised as financial services providers or licensed as collective investment schemes managers.

It also said it is investigating other individuals linked to the scheme, and they weren’t licensed either.

Regardless, the investor was convinced that the scheme was properly registered and licensed, providing the sense that the Trust was a legitimate investment and that his capital was safely invested.

BHI produced consistent annual returns, averaging 17% pre-2008 and 12% since then.

Another deciding factor for the investor was the ability to get relatively quick access to his funds, with Warriner promising investors they could withdraw all their funds on short notice. 

He first invested R500,000 in the BHI Trust and, after seeing consistent returns, chose to invest a further R2.5 million. In January 2023, the investor had committed R6 million to the Trust. 

He told BizNews that he did not suspect anything untoward as many other investors had committed far greater funds and even used the Trust as a living annuity in their retirement. 

“I can give you more contacts to people who have lost a lot of money. Some families have lost all of their money,” he said.

When his financial adviser retired due to health complications, a larger company, Global and Local, managed his funds. They raised no concerns about BHI with the investor. 

“Surely, if these people are all registered – all of these financial advisers and companies – they should be checking up,” the investor explained. 

“We now know that Warriner just made these numbers up,” said the investor. Warriner was just using fresh investments to pay out those already invested.

In hindsight, the investor said he maybe should have taken his money out of the Trust when the financial adviser retired and no large asset managers stepped in.

“None of the bigger companies even knew about BHI when I discussed it with them,” he said.