- with readers working within the Securities & Investment industries
Niall Hearty of Rahman Ravelli outlines the case.
Two British men will be sentenced in the US next year after admitting their role in a $99 million wine fraud.
James Wellesley, who is also known as Andrew Fuller, and Stephen Burton have pleaded guilty to their role in a fraudulent scheme that saw victims invest in loans that were meant for wealthy wine collectors. But the wine collectors and the wine they were supposed to own did not exist.
Wellesley, 59, has pleaded guilty to wire fraud conspiracy before District Judge Pamela Chen in Brooklyn. He is in a Brooklyn jail after unsuccessfully fighting extradition from Britain and will be sentenced in February next year. Under federal guidelines, he could be sentenced to up to 12 and a half years in prison. He has agreed to forfeit more than $1 million that is held in more than two dozen bank accounts.
Burton, 61, pleaded guilty in July to wire fraud conspiracy and money laundering conspiracy and accepted a $26 million forfeiture order. He is also jailed in Brooklyn but will be sentenced a month before Wellesley.
Posed
Prosecutors said the two men posed as executives from the London and Hong Kong-registered company, Bordeaux Cellars. They raised $99.4 million by promising those who invested in their loan scheme that they would receive regular interest payments from high net worth wine collectors.
It is alleged that the two men claimed the loans were backed by an inventory of more than 25,000 bottles of wine. But Bordeaux Cellars is said to have controlled only 217 bottles. Wellesley and Burton used money gained from their scheme on their personal expenses and paying interest to some investors. The scheme ran from June 2017 until February 2019 and collapsed when interest payments stopped.
While this fraud was based on the idea of top-level wine, it was basically an unsophisticated Ponzi scheme. Those responsible created the fake idea of a profitable enterprise in order to fool potential investors into parting with their money. Wine, like other commodities such as gold, has continued to hold its value and give good returns to investors; leading to it being seen as a relatively safe investment. This, however, can make it an attractive to those looking to make fraudulent gains.
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