BHI Ponzi: Read the fine print – Magnus Heystek on one of SA’s biggest ever Ponzi schemes

Magnus Heystek of Brenthurst Wealth Management knew within minutes that the investment scheme that has lost investors billions was “rubbish” – and he was able to advise a client to pull R3 million to safety. That is revealed by Heystek in this interview with BizNews on one of South Africa’s biggest Ponzi schemes. Investors have been counting their losses ever since the scheme’s mastermind Craig Warriner – dubbed South Africa’s Bernie Madoff – handed himself over to police. A court has now ordered the sequestration of the BHI Trust. Heystek shares a copy of the BHI Trust and Plus application forms which clearly states under Terms and Conditions, Point 12: “The investor acknowledges that he understands that the investment is not registered under any law and is unregulated.” Heystek points out: “It says there clearly this is a very dangerous investment scheme.” – Chris Steyn

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Relevant timestamps from the interview

00:10 – Introductions
00:23 – Magnus Heystek on the Ponzi scheme
01:47 – On his realisation that something was wrong about this investment
06:28 – What recourse do the victims have now
09:50 – In the history of Ponzi schemes in South Africa, where does this one fit in
10:50 – What propelled Craig Warriner into this Ponzi scheme
12:36 – Did Craig Warriner hand himself over for the sake of his own safety
13:48 – Conclusions

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Highlights from the Interview

That is revealed by Heystek in this interview with BizNews on one of South Africa’s biggest Ponzi schemes.

Investors have been counting their losses ever since the scheme’s mastermind Craig Warriner – dubbed South Africa’s Bernie Madoff – handed himself over to police. A court has now ordered the sequestration of the BHI Trust.

Recalling how he first heard about the scheme, Heystek says: “..we were approached a couple of years ago. I can’t even remember who knocked on our door and said, don’t you want to sell this to your clients? And I think it took me about five minutes to look at it and throw this away and say, this is rubbish.

Read more: BHI Ponzi: Victim who lost R6m helps explains how he was duped – as were thousands more

“But lo and behold, I came across a client who already had an existing investment with a brokerage called Global and Local. And one of the investments was this BHI investment.

“We started asking questions and said, what is this? And we started scratching and then we were told, no, this genius trader who has developed a system to arbitrage between three or four local and global shares, and he would make a profit every day.

“And you know, the usual bullshit story, excuse my French, but it was rubbish, rubbish, rubbish. But we took it a bit further, and we were trying to get this money out of BHI, and we were not very successful.

“And eventually we pretended that we wanted to put more money into the scheme. And then suddenly they were all over us and fill in these forms and that application. And eventually to cut a long story short, we just convinced the client to finally demand the repayment of their money. It was almost 3 million Rand.

“And luckily, I mean, that is one loss that was prevented. At least we have one investor who got the money out early because it just didn’t make sense.

“You don’t give your money to one smart guy who claims he can beat the system. He can beat the market. That’s why I’ve got regulated funds.”

Heystek shares a copy of the BHI Trust and Plus application forms that clearly states under Terms and Conditions, Point 12: “The investor acknowledges that he understands that the investment is not registered under any law and is unregulated.”

“…but again, you have very smart people handing over large amounts of money into a scheme, which by their own admission on their documents says, This is a trust. It’s an unregulated scheme. It’s not regulated by anybody in South Africa. Your money is high risk. You can lose it all. And the fund manager will take about 10% of your money every year for their fees. Please sign here and send your money. And people did it. That is the scary part…And it’s in big print. It’s not even a small print. Where it basically says, this is a scam. Invest here and people will still put their money in. And I mean, it could be a fantastic story if you make a joke out of it. And it says, this is a scam, but put your money in. And people did. And that’s what gets me about this story. I mean, they weren’t trying to hide it.

“…a lot of people are going to lose their money. And, you know, you have to turn around and say, look in the mirror, you put this money in, you didn’t read the forms. It says clearly this is a very dangerous investment scheme. You know, it’s very hard to have a lot of sympathy if somebody said, well, I didn’t read the fine print. This wasn’t even fine print. It’s a large print. It’s dangerous, risky, unregulated, but put your money in any way, and people do it. So that’s very, very sad.”

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He points out that people who put all their money in one scheme are breaking all the investment rules of the business. “I mean, it stands to reason that even in the best managed and regulated funds in the world, you do not put all your money in one fund or all your eggs in one basket. People still break those rules today. That is what I don’t understand.”

This is his advice: “… it’s like anything in life. Don’t try and break the rules to achieve a certain outcome. Just follow the rules. Pay your fees to qualified fund managers, to platforms, advisors, and the outcome will be good and fairly predictable. But there’s something in human beings that just wants them to break the rules. They wanna be special, they wanna be different. They wanna be part of a secret clan who knows how to make more money than the rest. And again, we’ve seen it doesn’t work.”