BHI Trust ‘was run as illegal scheme from inception’

Preliminary investigations by the trustees of the sequestrated BHI Trust have confirmed Craig Warriner’s declaration that the trust operated as “an illegal scheme from its inception”.

Trustee and fund manager Craig Warriner handed himself over to the authorities and confessed to committing fraud in early October last year.

In his confession, Warriner allegedly admitted to using the trust’s funds in a highly irresponsible manner over about 22 years.

The High Court in Johannesburg provisionally sequestrated the trust on October 25 last year. Shortly thereafter, Gert de Wet and Sumaya Mohamed from Kaap-Vaal Trust were appointed as the joint provisional trustees (JPTs) by the Master of the High Court.

On 7 February this year, BHI Trust was formally sequestered. The Master issued a certificate officially confirming De Wet and Mohamed as the final trustees on 15 April.

In a report filed in terms of section 81 of the Insolvency Act, released by the joint trustees this week, Warriner was quoted as saying that BHI Trust was a trading trust.

“It was a trust that took money and traded it on a short-term basis. It traded Anglo American, Billiton, it traded Naspers, it traded Standard Bank, British American Tobacco. We concentrated on all the 40 stocks, which is the top 40 stocks.

“You see, money goes in; I take it. People want money out, so I rob Peter to pay Paul. That is after 2008, and then what happens is that because you are showing decent returns, it becomes the Ponzi pyramid scheme … And the money comes in and it goes out.”

In the section 81 report, the trustees noted that, “from current information at hand”, it seemed that the trustees of the BHI Trust – Warriner and Christian Ashcroft – were in contravention of the Insolvency Act.

“The trustees are of the opinion that the trust was ran as an illegal scheme with the purpose of defrauding creditors,” the report reads.

According to BizNews, Ashcroft was one of the original complainants about Warriner. Ashcroft claims to have been deceived and has sought legal advice.

When news of the financial scandal broke last year, speculation ran rife as to its scale.

According to the section 81 report, the trustees have to date not been able to obtain a statement of affairs of BHI Trust as on 25 October 2023 (provisional sequestration date) from the trustees of BHI Trust “due to Warriner being incarcerated and Ashcroft advising at a preliminary interview that he had limited knowledge of the dealings of the BHI Trust”.

As of 7 May, the number of concurrent creditors stood at 1 034 claimants totalling R1 972 699 961 in claims.

Potential recoveries

While the claims owed to creditors currently come in at just under R2bn, the trustees’ preliminary investigations indicate that the potential assets/recoveries to be realised/made in favour of the BHI Trust and funds, as on the date of the provisional trustees’ appointment (30 October 2023), came in at just over R414 million.

Potential assets/recoveries as listed in the report include:

• Cash collected in bank account: R4 828 053.22.
• Voidable dispositions to be potentially recovered in terms of section 29 of Insolvency Act (25 April 2023 to 25 October 2023): R305 415 889.68.
• Pre-sequestration legal proceedings undertaken for recovery of funds: about R8m.
• Piment (Pty) Ltd recovery: R4.5m (ongoing).
• BHI Holdings (Pty) Ltd (in provisional liquidation): about R57m.
• Rubicon Administration (Pty) Ltd: about R30m.
• Amalgum Investments 108 (Pty) Ltd (in liquidation): about R5m.

Potential assets/recoveries still under investigation include:

• Dispositions without value in terms of section 26 of the Insolvency Act.
• Undue dispositions in terms of section 30 of the Insolvency Act.
• Collusive dispositions in terms of section 31 of the Insolvency Act.
• Other potential asset recoveries.

The report noted that the attachment executed by the Sheriff on 8 November 2023, pursuant to section 19 of the Insolvency Act, revealed no assets at the location where Warriner resided and operated his business in Blair Athol.

Under liabilities, the trustees denote employees as “none” and the South African Revenue Service as “unknown”. This is in addition to the creditors.

“The above and below figures, claims and values, etc. are subject to further investigation and verification,” the trustees said.

Double down or stand down

The initial creditors’ meeting took place on April 3 at the Randburg Court, but proof of creditors’ claims was withdrawn after creditors’ representatives were informed that contributions might be required.

The trustees, via a circular dated 11 April, informed creditors that they could withdraw proved claims. Alternatively, if creditors proceed, trustees will accept their claims, allowing a seven-day withdrawal window. This leaves creditors with a tough decision to either double down or step back. In the worst-case scenario, they may endure significant financial losses if asset recovery falls short. Conversely, efficient asset recoupment could fully repay creditors and cover additional costs.

Read: BHI Trust creditors face a dilemma: double down or stand down

The second creditors’ meeting is scheduled for 15 May.

According to the trustees, as on May 7, 115 claimants (claims totalling R214 934 344) had advised the trustees/creditors’ proxies that their claims should not be submitted for proof if a danger of contribution exists.

Along with the section 81 report, the trustees issued the resolutions to be submitted at the second creditors meeting on the BHI Trust website.

The resolutions outline a range of expenses that may be incurred during the trustees’ efforts to recover funds. These include hiring a forensic auditor, lawyers, and debt collectors, as well as potential litigation costs. It even lists employing night watchmen and/or security guards to protect the premises and/or assets of the “insolvent”. These expenses will be considered part of the overall costs of the sequestration and liquidation process.

Global & Local

The FSCA is currently compiling a comprehensive list of authorised FSPs who may have advised clients to invest in BHI Trust products.

Read: FSCA asks BHI Trust investors to come forward with information on FSPs

One FSP frequently associated with BHI Trust in the media is Global & Local Investment Advisors. According to Citywire, many BHI investors claim that Global & Local actively promoted BHI Trust to its clients. The FSCA’s website confirms that Global & Local’s licence was suspended on 20 March.

The section 81 report reveals that the joint trustees have also obtained a search and seizure warrant under section 69 of the Insolvency Act for data directly related to BHI Trust from the computers and devices of Global & Local employees.

The obtained data is currently being processed and evaluated.

In addition, joint trustees have obtained both the bank statements for BHI Trust and trading accounts for its trading activities with Afrifocus Securities (Pty) Ltd.

The report further states that no allowance was made to “the insolvent”.

“The trustees are of the opinion that the continuous engagement with especially Mr Warriner is necessitated in order for Mr Warriner to assist the trustees in the further identification of assets and liabilities of the BHI Trust,” the report read.