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Warriner told the court he could be of better service to investigators if bail was granted, and hinted that he could ‘hopefully’ recover 80c in the rand for investors. From Moneyweb.

Warriner is accused of violating numerous financial regulations and operating a Ponzi scheme, using funds from new investors to pay out older ones. Image: Shutterstock

BHI Trustee Craig Warriner will spend Christmas in ‘Sun City’ prison in Johannesburg after bail was refused last week in the Palm Ridge Magistrates Court south of Johannesburg. The case will resume in March 2024.

The state argued that Warriner remains a flight risk and, based on his own evidence, is untrustworthy. Warriner has been cooperating with authorities, but prosecutors argue that his cooperation is not because he wants to tell the truth, but to salve his conscience.

Read: There’s almost nothing left in the BHI bank account

Warriner is accused of violating numerous financial regulations and operating a Ponzi scheme, using funds from new investors to pay out older ones.

Among the laws he is accused of flouting are the Financial Advisory and Intermediary Services (Fais) Act and the Collective Investment Schemes Act, for operating without the required licence and for the illegal pooling of funds.

He told the court he had virtually no funds of his own, other than R17 000 in a bank account and another R20 000 in a credit card, and was therefore not in a position to post bail on his own behalf.

Warriner’s ex-wife was the one prepared to post his bail, saying by way of affidavit that she had also lost funds in the BHI scheme, but was nevertheless prepared to put up two properties as security.

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She had invested R3.3 million in BHI from the sale of a house in St Francis Bay, and was told by Warriner that her investment had grown to R4.5 million, allowing her to withdraw R1.5 million. Another R4 million was invested from a house sale in Stellenbosch.

Her ex-husband told her that the investment had grown to R6.5 million, allowing her to withdraw another R1.5 million. The rest, she believes, is lost unless there is a distribution following the liquidation of BHI.

Warriner handed himself over to police in October and offered to fully cooperate with authorities in unravelling a scheme that is reckoned to have roped in about R1.2 billion since 2013 from several thousand investors.

He told the court that the R3.1 billion figure widely mentioned in the media was turnover [through BHI’s accounts]. How much has been lost is the subject of an investigation by the provisional liquidators.

At the time of his arrest, Warriner indicated he would waive his right to bail and throw himself at the mercy of the court. Things have changed since then. Warriner has lawyered up and his attorney argued that he would be of more benefit to investigators outside of Sun City prison, where visitors are only allowed a few hours a day.

Listen: BHI Trust: Thousands of investors at risk

Warriner indicated to the court he could hopefully recover 80 cents in the rand for investors but did not provide any specifics on how this would be done, other than recovering presumably unlawful commissions from brokers and assisting investigators in identifying other sources of BHI funds.

BHI is now the subject of a Section 152 enquiry in terms of the Insolvency Act which will allow liquidators to subpoena witnesses and documents related to the scheme.

BHI’s joint provisional liquidator Gert de Wet of Kaapvaal Trust told Moneyweb that efforts are being made to track down a server in Thailand that is likely to shed more light on the actual extent of the scheme.

De Wet says Warriner has been cooperating with liquidators and other authorities: “It is now fairly clear that there are more than one or two bank accounts, and more than one or two entities involved. We would like to have easier access to Craig Warriner, but we are appointed by the master of the court, so it is not up to us to support or seek to block his bail.”

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

While professing his willingness to assist authorities, Warriner faced tough questioning from the state prosecutor.

“You are not trustworthy,” said the state prosecutor. Replied Warriner: “I am trustworthy… for the specific basis of telling you where I went wrong,” but advised the prosecutor “don’t give me your money.”

Several state agencies are now involved in investigating BHI and Warriner: the Financial Sector Conduct Authority, Directorate of Priority Crimes, Financial Intelligence Centre, SA Revenue Services and SA Reserve Bank.

Warriner told the court he had been investigated several times in the past – in 2013, 2017 and 2020 – and each time cooperated.

He started equity trading in 1999 and was “doing alright” until the financial crash of 2008, when about half the capital under his control was lost. He did not tell clients, believing he could trade his way out of the mess. That never happened. His conscience dictated that he come clean and confess his wrongdoing rather than run away.