Craig Warriner. Photo supplied
Craig Warriner, the man who defrauded investors of more than R1.6 billion in the BHI Trust Ponzi scheme, has been sentenced to an effective 25 years in jail after pleading guilty to 206 charges of fraud in the Palm Ridge magistrate’s court.
Warriner, a BHI Trust co-trustee, handed himself over to the police in mid-October 2023, confessing that he had managed the trust “irresponsibly”. He appeared in court for sentencing on Monday where his attorney Piet du Plessis read out his plea agreement with the state.
Warriner promised in his plea agreement that he would continue to assist the Financial Sector Conduct Authority (FSCA) and the liquidators of the trust — the fund was liquidated last October — to trace and recover as much of the money investors have lost as possible. He has been helping the authorities since his arrest and incarnation just over six months ago.
His fraudulent actions cost more than 200 investors at least R1.6 billion, evidence shows, although the actual size of the losses have not yet been quantified by the liquidators and a private investigator who has pursued the case for investors, many of them pensioners who sunk their life savings into the trust.
The FSCA launched an investigation into BHI Trust and Warriner as well as “other persons connected to BHI Trust” and “regulated entities which may have promoted the products”, which led to the authority announcing his professional debarment for 30 years last week.
Warriner pleaded guilty to 206 counts of fraud and one count of contravening section 7(1)(a) of the Financial Advisory and Intermediary Services Act.
The FSCA’s evidence provided to the state showed that Warriner had collected about R2.9 billion in investments since January 2020, but less than 20% of this was used for legitimate trading on the JSE securities exchange and the money market. This does not account for funds ploughed into BHI Trust by investors as far back as 2009 when the scheme first ran into financial trouble during the recession.
Reading out Warriner’s plea agreement, which the court accepted on Monday, Du Plessis said his client admitted that during December 2020 and October 2023 there was already a shortfall of capital taken on deposit from investors and that these funds were “not exclusively utilised as investments” on their behalf, according to his agreement with them.
“[The money] was in fact also utilised for payments to investors withdrawing their capital from BHI Trust or as payment of fictitious profits to investors in BHI Trust withdrawing such ‘profits’ from BHI Trust as and when such ‘profits’ was reported to them by the accused [the investment manager],” the plea agreement read.
Warriner was entitled to 10% of all capital gains on the investments and to interest generated on the BHI Trust bank account in terms of his agreements with investors.
Arguing in mitigation of sentencing, Du Plessis said Warriner is aged 60, has a clean criminal record and had not initially intended to operate a Ponzi scheme.
“The accused, although the affairs of BHI Trust was conducted by him on the basic scheme of a Ponzi scheme in the latter years, did not set out to conduct the business of BHI Trust in a fraudulent manner, but because of factors beyond his control, lost approximately half of the capital base of BHI Trust and then made the incorrect decision to endeavour to trade BHI Trust into a positive and profitable as well as liquid situation by carrying on the business of the trust instead of making known the financial trouble of BHI Trust to the investors/depositors and authorities,” Du Plessis said, reading from the agreement.
“The accused landed himself and BHI Trust in a position where he kept up the appearance of a successful investment trust with profitable returns to the investors/depositors whereas he was using capital from new investors to pay fictitious profits to investors withdrawing from the scheme or withdrawing ‘profits’ from the scheme, thereby in effect breaching the agreement between himself, BHI Trust and the investors/depositors involved and making himself guilty of criminal conduct in the form of fraud.”
The fact that he had handed himself over to the police and was offering assistance to the Financial Sector Conduct Authority and liquidators of the trust was also “considered as strongly mitigating and an indication of true remorse and change of ways by the accused”.
“The accused has offered his assistance to facilitate the tracing of funds relating to the trust in order to make sure that all creditors are fairly and even- handedly treated and to see to it that as much of the lost capital is retrieved as possible,” Du Plessis said.
He argued that if Warriner served 20 years in prison this would encompass the remainder of his natural life and “any longer period of imprisonment would constitute a cruel and inhuman punishment”.
But, in aggravation of sentencing, the plea agreement noted that the offences committed were “prevalent”, of a serious nature and that Warriner had induced investors to enter a contract with BHI Trust for the investment of their funds, “well knowing that … he would not be able to comply with his undertakings relating to the agreement”.
In addition, the actual loss suffered by investors was an aggravating factor, although at this stage the exact loss suffered after liquidation of the BHI Trust is not yet known.
Presiding magistrate Mogale accepted the plea agreement including Warriner’s guilty plea to the 207 charges, but said in light of the serious weight of his crimes, a 20-year sentence was not fair and just.
Mogale said he wanted to send out a strong message to deter others from committing similar crimes and proposed that the 10-year sentence for his contravention of the Financial Advisory and Intermediary Services Act be added to the proposed 20-year sentence rather than served concurrently.
But, after negotiation, it was finally consented that Warriner serve an additional five years for the charge resulting in an effective sentence of 25 years imprisonment.