FSCA investigates BHI Trust and Craig Warriner

The Financial Sector Conduct Authority (FSCA) said on Friday that it is investigating BHI Trust and Craig Warriner, who was arrested nearly two weeks ago on charges of theft and fraud.

“The focus of the FSCA investigation is on the activities of the BHI Trust and the possibility that it was conducting unauthorised financial services business and unauthorised collective investment scheme business. The FSCA confirms that none of the parties under investigation are authorised as financial services providers or licensed as collective investment schemes managers,” says the statement.

Read: Craig Warriner of BHI Trust surrenders to police for alleged fraud

The FSCA says it has extended its investigation to include related entities that may have promoted the products of BHI Trust. “If found to have done so, this is a serious contravention of financial laws, and may be subject to a fine, debarments of individuals involved from the sector and possibly removal of licence.”

Several BHI clients told Moneyweb they had been introduced to the trust by Global & Local The Investment Experts (formerly Global & Local Investment Advisors). Moneyweb asked Global & Local to respond but had not received a reply by the time of publication.

Brokers were apparently earning 5% commissions on referrals to BHI, which is well above the industry average. This raises the obvious question, what due diligence did they conduct into Warriner and BHI?

A 15-year fraud

If reports of Warriner’s admissions to authorities are correct, he appears to have run into trouble during the 2008 financial crash and has been trying to trade his way back to solvency ever since, suggesting this was a 15-year fraud and most likely a Ponzi scheme – attracting new investments to pay out older ones. 

We also know that BHI was purporting to operate under the financial services provider (FSP) licence of Axiam Capital. One contract seen by Moneyweb is between the client and Axiam Capital but with instructions to pay funds into BHI’s Nedbank account. Interestingly, the document is unsigned by Axiam, which apparently had no knowledge its name or FSP licence was being used this way. The contract looks like an out-and-out fraud. 

Grant Dykes of Axiam told Moneyweb the company intends to take legal action against the perpetrators.

“We are devastated to hear of the turmoil BHI investors are going through after the news of Craig Warriner being arrested. Having become aware of his arrest, we are also investigating Craig Warriner.

“BHI was not permitted to operate under Axiam’s licence,” said Dykes.

“In 2017, it came to our attention that advisors, unknown to us, were promoting an Axiam association with BHI. We contacted them and demanded that they desist as we had no association with BHI. We received confirmation from them that they had done this in error and would stop doing so immediately.

“We were also contacted by the FSCA in 2017, and we provided them with details of these breaches by the advisors,” Dykes tells Moneyweb.

For BHI investors, the waiting game begins. Applications will now be made to sequestrate the trust so that a court-appointed trustee can investigate its financial affairs and assess how much, if anything, is left in the pot and to prevent any further dissipation of funds. There will also likely be an enquiry into BHI’s affairs, and all those associated with the trust will be called to testify.

Listen: BHI Trust: Thousands of investors at risk

A WhatsApp group has been formed for BHI investors, and discussions are focused on who should be appointed to investigate the affairs of the trust. Cawood Attorneys in Pretoria has approached a number of investors, suggesting Olga Kotze from Kaapvaal Trust as trustee. Others are suggesting Shirish Kalian Attorneys.

What we’ve learned about Warriner

We’ve learned a few things about BHI Trust’s Warriner since he handed himself over to authorities nearly two weeks ago, waiving his right to apply for bail.

The former insurance salesman-turned-day trader worked his St Stithians College old boy school ties to rope clients into a scheme that appeared to offer consistent, but not spectacular, returns.

Several of his St Stithians clients have possibly lost all their savings.

It’s estimated that nearly R3 billion could be at risk, involving hundreds, possibly thousands, of investors.  

Some put their entire life savings into BHI, which seems to have been honouring some payouts until as recently as September. BHI was aiming high, insisting on minimum investments of R50 000 back in 2010.

“He [Warriner] was always throwing around telephone numbers. He wasn’t interested in small numbers. If you came to him with R100 000 to invest, he might take it on as a favour to you and let you know it was a favour. He was really after much bigger amounts,” says one person familiar with the operation who asked not to be named.

Read:
Eight ways to identify a Ponzi scheme
‘Get-rich-quick’ schemes: Five signs you’re being scammed

The BHI returns ranged from 0.5% to 2% a month, which is nowhere near the 10% a month being touted by crypto scam Mirror Trading International (MTI).

The promised BHI Trust returns were almost certainly fictional, as Warriner is reported to have told authorities he had been running the trust in an irresponsible manner, using “the funds of Peter to pay Paul”.

A September 2023 BHI statement passed on to Moneyweb by one BHI client shows a monthly performance net of fees of 1.78% and a rolling 12-month return of 15.18% with the following boilerplate disclaimer: “Past performance is no guarantee of future performance.” 

The shares apparently being traded were Anglo American, Naspers, Richemont, and Billiton. This may be more fiction if Warriner’s admissions to authorities are correct. 

A Google search of BHI and Warriner turns up surprisingly little, which makes his apparent success in attracting billions of rands all the more mystifying.

Not everyone fell for his cocky sales pitch. “I met him a few times and had him pegged as a bull****er,” says one businessman, evidently immune to his charms. “He got people to invest because his advertised returns were 20%-plus a year. I just didn’t find this realistic.”

Those who knew him were able to fill in some of the blanks in his life. He took brokers and key clients to Rugby World Sevens games abroad, where the “Dom Perignon was on tap”.

He appears to have started as an insurance salesman, then found that day trading offered a faster lane to wealth. He lived modestly until the early-to-mid 2000s, when he could be seen driving a Ferrari and dining at the Butcher Shop in Sandton.

We will no doubt learn more about BHI, Warriner, the intermediaries that supported him and others who feasted off his apparent largesse as the official inquiries get underway.

Following his arrest in October, Warriner reportedly asked to be put in a cell by himself because of threats from other inmates. There is some speculation he may have taken in funds from criminals, lied about the returns, and then was unable to repay the capital. That being the case, he chose the safety of a prison cell rather than risk his life on the outside. He reportedly told the Palm Ridge Magistrates Court that he would plead guilty to whatever he is charged with and declined legal representation. 

Where to start your due diligence:

The FSCA says it has repeatedly warned the public of the dangers of financial services dealings with entities that are not licensed.

“When investors buy financial products and services from entities that are not licensed as financial institutions, they do so at their own risk, and they do not enjoy the protection and risk mitigation measures associated with appropriately licensed and authorised entities. Licensed financial institutions are subject to strict laws and oversight by the regulator, ensuring that the businesses are well governed and treat their customers fairly.”

Here’s where you can check if an entity has an FSP licence:

• Call the toll-free number 0800 110 443;
• Do an online search for authorised financial institutions by licence category here; and
• Do an online search for a financial institution that is an authorised FSP in terms of the Financial Advisory and Intermediary Services Act here.

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