Among the parties who benefited from the BHI Trust in the six months leading up to its sequestration, some of those who received the first letters of demand seem less than eager to return the funds they gained during that period.
In early October last year, trustee and fund manager Craig Warriner surrendered to the authorities and confessed to committing fraud.
The High Court in Johannesburg provisionally sequestrated the trust on October 25, and Gert de Wet and Sumaya Mohamed of Kaap-Vaal Trust were appointed as joint provisional trustees.
On February 7 this year, BHI Trust was formally sequestrated, and De Wet and Mohamed were confirmed as the final trustees on 15 April.
According to section 29 of the Insolvency Act, the trustees are legally obliged to pursue action against entities or individuals who benefited from BHI Trust in the six months leading up to its sequestration. The law mandates that creditors who gained an unfair preference during this period must return the advantage they received.
“This means certain creditors received funds, giving them an unfair advantage over others who did not,” the trustees explained.
In their third circular to creditors, dated 17 January, the trustees stated that the initial estimate of the amount involved exceeded R300 million. The first 92 letters of demand, totalling about R178m, were sent by WS Badenhorst Attorneys from 24 June.
In a sixth circular issued last week, the joint trustees informed creditors that they are now considering drafting legal applications against individuals and entities where negotiations have failed or where co-operation has been lacking.
Additionally, the trustees are preparing to issue about 200 more letters of demand to those who were unduly preferred in the six months before the trust’s sequestration.
Potential assets for recovery
A report submitted under section 81 of the Insolvency Act in May by the trustees stated that creditor claims amounted to nearly R2 billion, while potential assets and recoveries, as of the provisional trustees’ appointment on 30 October, totalled slightly more than R414m.
In a fifth circular distributed to creditors in June, the trustees shared: “812 claims totalling R1 512 857 185.24 were proved against the BHI Trust insolvent estate during the second creditors’ meeting held on 12 June at the Randburg Magistrate’s Court.”
The section 81 report indicated that in addition to the voidable dispositions to be potentially recovered in terms of section 29 of the Insolvency Act (estimated at R305 415 889.68), potential assets or recoveries to be realised or made in favour of BHI Trust included just under R5m held in a Nedbank account in the name of BHI. The Financial Intelligence Centre froze the funds in October last year.
Read: Financial Intelligence Centre ‘freezes’ BHI Trust bank account
Other potential assets/recoveries listed in the report included:
- Amalgum Investments 108 (Pty) Ltd: about R5m;
- Rubicon Administration Services (Pty) Ltd: about R30m;
- Piment (Pty) Ltd: R4.5m; and
- BHI Holdings (Pty) Ltd: about R57m.
Read: BHI Trust ‘was run as illegal scheme from inception’
A provisional court order for the liquidation of BHI Holdings (Pty) Ltd was granted on November 14 last year. The cause of action was for more than R58m due to BHI Trust by BHI Holdings over about five years. The return date for the final BHI Holdings’ liquidation was set for May.
The final liquidation of Amalgum Investments was granted on 6 March.
Warriner was also a director of Amalgum Investments.
Read: Court orders to assist in asset seizure and unravelling of BHI Trust
“The trustees are working on other matters pertaining to potential recoveries to be made in favour of The BHI Trust,” stated the sixth circular to creditors.
An inquiry in terms of section 152 of the Insolvency Act was initiated late last year. Numerous subpoenas were issued for various parties involved with BHI Trust to provide information, documentation, and testimonies on the financial affairs of BHI Trust. The first of these sittings was held between 6 and 8 December 2023 and continued in April.
According to the joint trustees, the section 152 inquiry proceeded on 14 August.
The main purpose of the inquiry is to obtain information as to how creditors’ money was dealt with, to identify further transactions that need to be set aside in accordance with the applicable laws, and the collection of assets or funds due to the trust.
Because the inquiry is in camera, a report for public distribution can be made available only once the inquiry has been concluded, and with the consent of the Master of the High Court.
The first liquidation and distribution account is due to be submitted to the Master by 15 October.
“The trustees do not foresee that any dividend will be allocated and will consider the position nearer to the time,” stated the sixth circular to creditors.
Follow the money
Warriner was sentenced to 25 years in prison for fraud following a plea deal at the Palm Ridge Commercial Crimes Court on 27 May. He was convicted on 206 counts of fraud, along with a charge for violating the FAIS Act by operating without an FSP licence. At 60 years old, Warriner now faces a substantial prison term.
Read: AfriForum criticises Craig Warriner’s plea deal for lack of disclosure
The State’s investigation found the trust operated since 2002 as a share-trading scheme, where investors initially contributed a minimum of R50 000.
Warriner traded in seven identified shares on the JSE and later introduced a more aggressive scheme known as “BHI Plus”, which offered higher returns but came with increased risk. This was not a regulated fund.
According to the State’s charge sheet, Warriner deceived clients by claiming their funds were invested in various “strategies”, although only a small fraction was traded in securities. Most of the funds were placed in an interest-bearing money market account, generating income solely for Warriner.
The charge sheet further details that beneficiaries deposited their investment funds into a Nedbank Corporate Saver money market account.
During the analysis period from 1 January 2020 to 30 November 2023, records show that only about R584m of the nearly R3bn received was transferred to JSE broker Afrifocus Securities (Pty) Ltd for securities trading, accounting for less than 20% of the total.
Additionally, about R576m was transferred back to the BHI Trust money market account from Afrifocus during this time, yet the trading profits were insufficient to support the returns Warriner had promised his clients.
Warriner falsely reported to BHI clients and investors that their funds were being profitably traded, issuing them monthly statements that were entirely fabricated.
The charge sheet notes that Warriner used new investors’ funds to pay existing beneficiaries, but by 2023, this Ponzi scheme collapsed because of a lack of capital in BHI Trust.
In the sixth circular, the joint trustees stated that they had subpoenaed Nedbank for bank statements dating back to the inception of the trust.
“Same is still awaited for the period for at least pre-2008.”
The plot thickens
Just a few days after Warriner’s sentencing, Michael Haldane (55) and Sona Pillay (54) were arrested on charges of fraud and money laundering.
Haldane, the founder of Global and Local Investment Advisors (GLAI), resigned from the company in December last year, and its FSP licence was suspended in March.
Gerhard van Deventer, the FSCA’s head of enforcement, previously told Moonstone that the suspension was related to the relationship between BHI and Global & Local. He said: “Global & Local is one of the FSPs that placed clients with BHI Trust.”
Haldane was also the director of Rubicon Administration Services (RAS) from its incorporation until May 2005. Katrinos Cost then took over from May 2007 to March 2019.
Pillay became the director of RAS in October 2022. He administered the BHI Fund, while Rubicon Trust (RT) and RAS handled all the trust’s administrative functions, including confirming deposits made by investors, issuing monthly and quarterly statements, and facilitating client withdrawals.
According to the charge sheet in the State’s case against Warriner, RAS, under Warriner’s direction, issued investment certificates signed by him to beneficiaries, promising a 10% annual return and yearly profit withdrawals. The agreement allowed Warriner to take 10% of all capital gains “on such investment, as well as the interest generated on the banking account of BHI Trust on all balances from time to time”.
Both Haldane and Pillay were released on R100 000 bail following a bail application hearing at the Palm Ridge Magistrate’s Court on 10 June.
In the affidavit presented by the prosecution at the bail hearing, the State described BHI Trust as “a special purpose entity whose sole purpose was to siphon funds from unsuspecting members of the public”.
The affidavit added: “This trust did not exist without the aid of close and related-party enablers and direct beneficial entities.”
Providing background to the case, the State noted that Warriner and Haldane had a long-standing business relationship.
The State alleged that GLAI promoted and sold the BHI Trust as an investment vehicle, presenting it both as an unregulated fund and as having the “appearance” of being a regulated fund manager, “while it was not”.
Regarding Amalgam’s role in the scheme, the State explained that Haldane and Warriner ran the company together from May 2007 until Haldane resigned as director in October 2017. The affidavit stated that the shareholding structure initially included The Go Big 3 Trust, where Haldane was a trustee.
The State also alleged that Haldane sold his shareholding to the Rubicon Global company in the British Virgin Islands, which then sold the same shares to Trovara in Hong Kong.
“This company received investor funds from the BHI Plus scheme via Amalgam. It is alleged that an amount of R45m was transferred to two offshore trust accounts where Haldane had a beneficial interest.”
Allegations against Haldane
The State has levelled serious allegations against Haldane, claiming that he played a central role in luring unsuspecting investors into the BHI Trust scheme. According to complainants, Haldane’s recommendation and assurances were pivotal in convincing them to invest their money with BHI Trust.
At GLIA, Haldane not only offered a range of financial services but also aggressively marketed the BHI Trust and the high-risk BHI Plus investment to potential investors. It is alleged that Haldane, along with Pillay and Cost, facilitated these schemes, receiving commissions in return.
The allegations go further, suggesting that Haldane, as the principal and/or director of multiple corporate entities, used these entities as conduits to siphon off funds that rightfully belonged to BHI’s investors.
When signing on new investors, Haldane reportedly assured them that only a portion of their investment would be traded in South Africa-listed shares. However, no mention was made of any offshore transfers.
Allegations against Pillay
The affidavit painted a damning picture of Pillay’s involvement in the BHI Trust scandal.
Pillay is alleged to have had a close relationship with key figures in the scheme, including Warriner, Haldane, and Cost, who has since emigrated to Thailand. This connection is evidenced by their co-directorships in various business entities, the prosecution noted.
The State claims that Pillay abused his position by indiscriminately investing trust and estate funds into BHI while managing these assets at RT through what was described as a “control account”. These investments, which reportedly earned him significant fees, were made without the approval of the beneficiaries under his management. The funds unlawfully taken from clients’ trusts and estates at RT are said to amount to R230m.
Further allegations suggest that large sums of the stolen funds from the BHI Trust account were funnelled into Pillay’s personal Nedbank account, referred to in court documents as the “pool account”. Instead of distributing these funds as returns to investors, Pillay is accused of rerouting the money into other accounts in his name.
The State uncovered evidence from bank records and casino logs showing that Pillay engaged in extensive gambling activities, using these transactions to convert investor deposits into cash.
His gambling behaviour, particularly at Sun City Casino, is said to be a key part of his method for “cleaning” the illicit funds.
According to the affidavit, Pillay visited Sun City Casino about 131 times between November 2019 and January 2024, placing bets totalling more than R797m and withdrawing nearly R782m.
“Clearly, he disguised his unlawful conduct as a gambling habit,” the affidavit notes.
This pattern of behaviour was reportedly repeated at various other casinos, where Pillay allegedly moved an additional R93m in a similar manner.
Even after Warriner turned himself in last October, Pillay is said to have continued this scheme, moving a further R14m at Sun City Casino using the same modus operandi.
According to the State, Pillay “cleaned” the proceeds of crime equivalent to almost 50% of the stolen investor funds.
Haldane and Pillay are scheduled to again appear in court on 16 October.
good day,Michael Haldene had personally advised investing in BHI,BHI Trust and Amalgam,trusted him,how is the business still operating, where is the salaries and rental money money coming from,surely the directors must have drawn considerable amount money, before the company was exposed.
Maybe Sun City should be called to answer for their role in the money laundering. I am sure that this is a very common way to clean dirty money. Seems like our industry is the only one that has to apply the FICA rules?