In the past year, South Africa’s Financial Sector Conduct Authority (FSCI) has debarred 156 people from the industry. In this interview with BizNews, investment strategist Magnus Heystek of Brenthurst Wealth comments on these debarment orders, including the 30-year-ones served on Michael Haldane – who is on bail on charges of fraud and money laundering in connection with the BHI Trust Ponzi, and his colleague Mauro Forlin. “…it looks like the FSCI has thrown the book at the guys that were involved in the BHI Trust…to debar someone for 30 years is effectively…a life sentence. In effect, they’ll never work in the industry again. And I think it reveals that the BHI Trust and the individuals involved in that…were very naughty guys. They’ve been stealing and siphoning money for many, many years. And I’m just surprised that it took so long for this scheme to be exposed.” Heystek also speaks about how financial regulation has improved dramatically over the past decades, but says the financial system is under pressure to improve it even more because “as we currently speak, many institutions are very hesitant to deal with South African money”.
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Extended transcript of the interview ___STEADY_PAYWALL___
Chris Steyn (00:02.848)
The BHI Trust Ponzi scheme has devastated the finances and lives of hundreds of investors. We speak to investment guru, strategist, Magnus Heystek of Brenthurst Wealth about the debarment of two once-trusted investment advisors, including Michael Haldane, who is on bail on charges of fraud and money laundering. Welcome, Magnus. But what’s interesting is that the FSCI has also been very, very active the last past year. mean, they’ve debarred 156 people from the industry, which is a record high.
Magnus Heystek (00:26.849)
Yes, good morning Chris, nice talking to you again.
Chris Steyn (00:30.806)
Magnus, you’ve seen the debarment orders – and what is your comment?
Magnus Heystek (00:37.377)
Well, it looks like the FSCI has thrown the book at the guys that was involved in the BHI Trust. I mean, to debar someone for 30 years is effectively what, you know, it’s a life sentence. In effect, they’ll never work in the industry again. And I think it reveals that the BHI Trust and the individuals involved in that, they were they were very naughty guys. They’ve been stealing and siphoning money for many, many years. And I’m just surprised that it took so long for this scheme to be exposed.
As I said on an earlier interview with Alec, we picked this up many years ago. We looked at it and we walked away and we said, not interested. And we actually removed clients out of it.
But you know what I think though, and I often think, you know, trying to analyze why people fall for these scams apart from the high returns that they offered. But the returns were not that high relative to what you could have got in the market. I think they were whispering into the ears of their clients that this is tax-free money. We don’t report to SARS. I think that’s where they hooked the investors to come and put money. People would look at you and say, well, we don’t pay tax on those investments because it’s a trust and the usual spin story. I think the tax angle was one of the reasons why people stood in a queue to hand over their money to these players.
Now, the BHI Trust was run by Craig Warriner who is in jail at the moment. Then Michael Haldane and Mauro Forlin were very prominent financial advisors. They were appearing on all media all the time, various outlets, advertising, very aggressive advertising, and they had a big business. But behind the scenes, we know that they were naughty guys and the FSCI rightly stepped up and slapped them with a big fine. And of course, these are criminal proceedings on its way.
But what’s interesting is that the FSCI has also been very, very active the last past year. mean, they’ve debarred 156 people from the industry, which is a record high. Apart from these three players that we’ve just mentioned, we also know about Markus Jooste, who was fined 475 million Rand the day before he shot himself. But there’s another player that’s popped up. His name is Coenraad Botha And I had to search for him, but he was slapped with a fine of 216 million Rand. And below the radar, he was also running a very, very dicey Ponzi scheme, attracting people, gullible people with very high interest rates, but they’ve also closed him down quite rightly. And so yeah, they’ve been very, very busy.
Chris Steyn (03:43.412)
Okay, because people were really concerned that it took the Financial Sector Conduct Authority six years to investigate the BHI Ponzi.
Magnus Heystek (03:52.772)
Well, you know, I can’t comment on that. You know, maybe the FSCI must respond to that question, why did it take so long? And I think that these cases are notoriously difficult and you’re dealing with dubious characters who don’t, they’re not going to be forthcoming with saying, look at, look at, yeah, these are our spreadsheets, here are our bank accounts. And if you interject an aggressive lawyer or two between the FSCI and these guys, you can stretch out an investigation for a very, very long time, as we’ve seen, if you follow the Stalingrad approach to legislation.
I don’t know, but I’m just saying that to certain people, you looked at the scheme and you say, it’s too good to be true, walk away, but people are gullible. They like giving their money to characters like this.
Chris Steyn (04:50.465)
But victims have not had much luck either with claims to the Ombud for Financial Service Providers. As far as I know, none of them have had any redress there.
Magnus Heystek (05:01.367)
Well, you know, that’s the problem. If the money is gone, the money is gone. There’s nobody to pay them back. In fact, they might be on the hook for those people who got out early and they got out with a profit. I am quite sure that the trustees of the sequestrated Trust might be talking to them as we speak and saying, guys, you actually illegally benefited from the scheme. Please give back some money.
That is the further consequence of landing in these schemes. We’ve seen it over many years, I recall, the MP Finance Scheme in Van der Bijl Park. Not only did they lose their money, they were all on the hook for the profits that they made while the scheme was up and running.
That’s a further reason why you don’t get involved in these scams because the lawyers will come after you. It takes a lot of time, but they will come after you. You know, it’s just not worth it trying to chase these higher returns or higher returns than you can get in the marketplace. You can get very, very good returns almost on a guaranteed basis in income funds in South Africa, anything between 10 and 15 percent in a regulated environment. So if you want more than that, you’re just being plain greedy or stupid.
Chris Steyn (06:23.788)
Well, like you said, the Kingpin Craig Warriner has been sentenced to 25 years. Haldane still has to stand trial. There is a liquidation process. But the longer this drags on, the lesser chances are of recoverable assets being found to refund victims. So it’s a double whammy for them, isn’t it? I mean, this could take years – if ever.
Magnus Heystek (06:46.361)
It does take years. It can take many, many years. In fact, 10 years possibly. I know of many scams or schemes that have imploded. And then 10 years later, the attorneys are still busy. The liquidators are involved. It’s a very long and slow process, but it does move on. And remember, the liquidators and the attorneys are incentivised to pursue it because they can make money out of it. They’re not going to drop and walk away and say OK…they will come after you. It’s a big industry for lawyers and liquidators to chase after ill-begotten monies.
Chris Steyn (07:32.908)
Do you think there are weaknesses in the regulatory oversight and enforcement systems that leaves investors very vulnerable?
Magnus Heystek (07:47.223)
I think the regulation has improved dramatically over the last 10 to 20, even 30 years. If I think back in my days as a journalist and reporting on things like the Masterbonds and the Supreme Bonds and the Leaderguards and the Sharemaxes and the Pickvests, there were lot of gaps that were exploited by sharp operators. I must say the situation today is far better. It’s much improved.
It’s not only the regulator, it also comes from the banking side. It comes from Anti-Money Laundering legislation. It comes from FICA. And one of the positive outcomes of South Africa being on the Grey listing is that everybody is forced to apply these rules, not only because it’s an internal issue, it’s a global issue. If we don’t clean up our act, the world doesn’t want to trade with us. They don’t want to deal with our banking institutions or with South African individuals. So as we currently speak, many institutions are very hesitant to deal with South African money. The Royal Bank of Scotland the other day said, no, thank you. We don’t want to deal with South Africans. Fundsmith, the very large fund, they said, thank you. We do not want to deal directly with South Africans.
So we had no choice. We had to clean up our act and there’s a reason why we are on the Grey List. It was too easy for hot money to move around in the banking and in the investment circles. So yes, the situation has improved and I think the financial system in South Africa is under pressure to even improve it further. So yes, it irritates you when you have to do FICA and compliance, but one feels good if everybody else is judged by the same standards; then you abide by their rules, then you know the system is working. But there were gaps, there were deliberate gaps. I mean, that’s how the Guptas got their money out and that’s how criminals can wash the proceeds of their crime. But it is getting better, strangely enough, it’s getting better.
Chris Steyn (10:03.628)
But I think you, of all people, would tell people to rely on their common sense instead, wouldn’t you? And just lastly, the biggest red flags for a Ponzi, just to remind those investors who get greedy.
Magnus Heystek (10:14.535)
Well, you know…common sense is not so common as we think. You’ve got to understand, not everybody’s financially literate. They come into money, inheritances or whatever the case might be, or they sell a property, and suddenly they have to make investment decisions. And they sometimes make very poor investment decisions. And sometimes they make bad investment decisions out of greed, but sometimes they make them out of fear – and they fall for an investment that offers security, 100 % security. And the perpetrators of those schemes play on that. They use the word guaranteed or secured and people fall for it because they fear losing their money. It’s a very big fear for most people. But the perpetrators of those schemes play with those emotions. Your money is safe with us and you’re going to get a good return. They don’t dig deeper and they ask, where do you invest the money? How do you generate those returns?
I saw it a couple of years ago with Exponent, which was being marketed all over the media, radio, TV, rugby stars were promoting Exponent – and they’re also three or four billion Rand we’re missing. We did research on behalf of our clients because we saw some of our clients moving their money to Exponent and we came back and we said, guys, this is scam. They were cross with us. They’re angry with us. I think there’s an interview somewhere in your archives with BizNews where I was on the radio with Alec and the perpetrators of the scam. They were denying it flatly – and boom, there you go, three billion ran gone.
To come back to your question, talk to a registered financial advisor. There’s a website, go check.
Magnus Heystek (12:12.41)
Go talk to two or three people. Don’t just rush into the first good-looking salesman with night-white teeth and looks like a film star. That’s where people make mistakes.
Chris Steyn (12:28.748)
Thank you. That was Magnus Heystek of Brenthurst Wealth speaking to BizNews about the latest developments in the Ponzi scheme. Thank you. BHI Ponzi scheme. Thank you. And I’m Chris Steyn
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