BHI Ponzi: Warriner’s mandate with registered FSP Axiam Capital was terminated in 2013

By Alec Hogg

Marketing of the BHI Ponzi scheme relied heavily on its kingpin Craig Warriner’s claimed associations with reputable financial brands – primarily Axiam Capital Management. In a response to BizNews the company’s principals, Colin Huber and Grant Dykes, say Warriner and BHI’s investment management mandate with Axiam terminated on 6 February 2013.

However, the Somerset West money management company does admit that Warriner was “an Authorised Representative” – although states this meant “Warriner had no agency (was NOT authorised) to initiate or conclude any investment mandates on Axiam’s behalf. Furthermore, he had no agency to conclude any contracts whatsoever on Axiam’s behalf. As an employee, he had no access to client accounts.”

Axiam’s directors say they have become aware in court papers that Warriner “was fraudulently using our company credentials as well as our Financial Service Provider number in various types of documents. He had no agency to conclude any contracts whatsoever on Axiam’s behalf.” For the past 10 days the directors say they have been working with their legal team “and are gathering evidence to lay charges against Warriner for illegally using our credentials.”

This raises massive questions over the actions of financial intermediaries who invested client funds into Warriner’s BHI Trust. The now jailed fraudster, who admits to having operated his scheme as a Ponzi since 2008, used financial advisors to expand his direct marketing after needing more money to keep the cycle going after running out of funds from old pupils and teachers at his alma mater, private school St Stithians.

The biggest conduit of BHI’s most recent inflows is Milpark-based brokerage Global & Local, whose founder Michael Haldane has rejected our numerous interview requests. Global & Local has also been an aggressive acquisitor of one-man and other small financial advisory firms, including one with with 500 clients many of which had already invested with BHI in some way.

This raises the likelihood of collusion between Haldane and Warriner.

In addition, Haldane’s rapidly expanding company which has naming rights over the 18-story former MetalBox head office where it is headquartered, has deep links into the coloured and indian community through a thriving branch office in Lenasia. BHI is reputed to have paid intermediaries like Global & Local a commission of 5% up-front on any capital raised.

By clarifying the context of its relationship with Warriner, Axiam has put another piece into a puzzle that shows BHI was a classic Ponzi operation.

In this instance, the central character claimed to have invented a foolproof, money-making “secret” (Warriner’s was day-trading a handful of stocks); BHI clients, including many who bank with RMB and Investec Private Banks, believed they were part of a special club and in the rare cases where they did share, mostly rejected warnings from reputable advisors.

As with any Ponzi, especially towards the end to keep the scam going requires highly incentivised intermediaries (5% commissions in this case) to perpetuate the fraud either deliberately or through neglect; and payment of a steady “dividend” to investors – funded through fresh investments – high enough to attract new victims, but not too high to attract undue attention.

Billions raised through the unregulated BHI Trust were used by Warriner to fund a luxurious lifestyle of Lamborghinis, Ferraris, a private jet and a Bryanston mansion. He justified this as part of his share of the “secret” – fooling everyone, including himself, by maintaining his special formula would eventually recoup all the losses.

Ponzis depend on the continuous landing of fresh fish, so can continue for decades as was the case with BHI. But it’s a game of financial musical chairs where there is no winner.

Axiam’s response to BizNews shows that much of the marketing material (see below) provided by enabling intermediaries was itself fraudulent.

Axiam’s full email reads:

Dear Alec,

Thank you for your request for an interview. We may take you up on the offer at a later date.

Axiam Capital Management, through court papers, became aware that Craig Warriner was fraudulently using our company credentials as well as our Financial Service Provider (FSP) number in various types of documents.

As an Authorised Representative, Warriner had no agency (was not authorised), to initiate or conclude any investment mandates on Axiam’s behalf. Furthermore, he had no agency to conclude any contracts whatsoever on Axiam’s behalf. As an employee he had no access to client accounts. Axiam suspended Mr.Warriner as an employee and removed him from our licence when he was arrested and we are taking disciplinary action against him. Furthermore we have started debarment proceedings against him.

We have been working with our legal team for the past ten days and we are gathering evidence to lay charges against Warriner for illegally using our credentials. Furthermore, our legal and compliance team, has not identified any risk to either Axiam Capital Management (Pty) Ltd or its directors in relation to the BHI Trust.

The trustees of BHI terminated their Investment Management Mandate with Axiam Capital Management (Pty) Ltd on 6 February 2013. Axiam has never been part of marketing, soliciting, accepting, managing, administering and pooling money or funds or deposits and processing these from members of the public in respect of the BHI Trust.

None of our clients have experienced losses because of Warriner’s fraudulent actions and Axiam has never invested in the BHI Trust. Our clients have 24-hour access to their accounts as their accounts are held in their own names at reputable, accredited institutions.

Our investigation into Warriner’s fraudulent action is ongoing.

As mentioned above, we may take you up on an interview at a later date. At present our focus is on preparing the charges we want to lay and communicating with our clients.

Kind regards,

Colin Huber and Grant DykesAxiam Capital Management (Pty) Ltdwww.axiam.co.za2 Burchell Close, Natures Valley, Somerset West, 7130
Axiam Capital Management is an Authorised Financial Service Provider in terms of section 8 of the Financial Advisory and Intermediary Services Act, 2002 (Act No.37 of 2002) LICENCE NO. 189