The man behind a R2.3 billion Ponzi scheme in South Africa

Craig Roy Warriner, through the BHI trust, ran one of the biggest Ponzi schemes in South Africa’s history in which investors lost millions.

Warriner, dubbed South Africa’s Bernie Madoff, received money from thousands of wealthy clients through his strong social network.

As a St Stithians private school old boy, he had access to many high-net-worth individuals with good connections.

He offered three fictitious investment strategies to these wealthy clients: the BHI Strategy, BHI Plus, and the BHI International Strategy.

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”.

While these strategies promised to invest clients’ funds in financial products and assets, the reality was very different.

The Financial Sector Conduct Authority’s (FSCA’s) latest regulatory actions report, released last month, revealed what really happened.

In September 2020, the FSCA started investigating BHI Trust and Warriner to determine potential contraventions of financial sector laws.

The financial analysis conducted by the FSCA for September 2020 to November 2023 revealed significant wrongdoing.

Of the R2.9 billion he received from clients, only approximately R584 million, or about 20%, was invested in a legitimate investment vehicle.

The remaining 80% of the funds were held in a money market account, used to pay returns to other investors in a Ponzi scheme fashion.

The money held in the money market account was also used to fund Warriner’s extravagant lifestyle.

During this period, Warriner hosted lavish parties, mingled with South Africa’s political and business elite, and enjoyed life’s luxuries.

He donated large amounts of his ill-gotten gains to St Stithian’s, where the school’s High-Performance Center was named after him.

It all collapsed, and in October 2023, Warriner handed himself over to the SAPS on allegations of operating a fraudulent investment scheme.

The NPA, FSCA and SAPS collaborated on the case, and Warriner was found guilty of 207 counts of fraud and sentenced to 537 years of imprisonment.

The court ordered that these sentences run concurrently, resulting in an effective 15-year imprisonment.

Warriner also received a 10-year direct imprisonment for conducting unregistered financial services businesses.

The 10-year sentence does not run concurrently with the fraud sentences, resulting in a total effective imprisonment of 25 years.

FSCA debarment order

In May 2024, the FSCA banned Warriner from providing financial services to individuals and companies.

The FSCA’s investigation found that BHI Trust and Warriner acted as discretionary Financial Services Providers (FSPs).

Simply put, they exercised discretion in buying and selling securities and financial products on behalf of clients.

They were, therefore, required to be authorised as a Category II FSP. They were not authorised to do this.

Therefore, the BHI Trust and Warriner contravened section 7(1) of the Financial Advisory and Intermediaries Service Act No. 37 of 2002 (FAIS Act).

Moreover, Warriner, in his capacity as a trustee of the BHI Trust, rendered financial services to clients on behalf of the BHI Trust.

He was not authorised as an FSP to perform these services, therefore contravening section 13(1)(a) of the FAIS Act.

On 7 May 2024, the FSCA debarred Warriner for a period of 30 years. Warriner is prohibited from:

• Providing, or being involved in the provision of, financial services.
• Acting as a key person in a financial institution.
• Providing specified financial services to a financial institution, whether under outsourcing arrangements or otherwise.

“It is worth noting that Warriner did not meet the requirements to be licensed as a Category II FSP,” the FSCA said.

The authority said the Warriner case highlighted the importance of checking whether a business or individual is authorised to provide financial products and services.

The FSCA added that it is also important to establish what category of advice the person is registered to provide.

“There are instances where companies or people are registered to provide basic advice for a low-risk product and then offer advice on far more complex and risky products,” it said.