An indictment was filed on 28 February 2022 in a US federal court charging British citizens Stephen Burton and James Wellesley with wire fraud conspiracy, wire fraud and money laundering conspiracy.
The US Department of Justice said this was in connection with a “scheme perpetrated through their company Bordeaux Cellars, the trade name for two private limited companies, Bordeaux Cellars and Bordeaux Cellars London, registered, respectively, in Hong Kong and London”.
It added that the defendants allegedly caused investors to invest over $99m (£73m, €86m) in “sham loans purportedly collateralised by valuable bottles of wine”.
Collateralisation is the use of a valuable asset to secure a loan. If the borrower defaults on the loan, the lender may seize the asset and sell it to offset the loss.
Wellesley was arrested on 4 February 2022 in the UK and Burton remains at large.
Details
The indictment alleges that from at least June 2017 and continuing through February of 2019, the defendants posed as executives of a company called Bordeaux Cellars.
They enticed alleged victims at investor conferences held in the US and around the world.
The US Department of Justice said in a statement on 1 March 2022: “The defendants claimed to investors that Bordeaux Cellars brokered loans between investors and high net worth wine collectors that would be fully collateralised by high-value collections of wine.
“The defendants promised that investors would receive regular interest payments from the borrowers, and that Bordeaux Cellars would keep custody of the wine pledged as collateral while the loans were outstanding. As alleged, these representations were false, the ‘high net worth wine collectors’ did not actually exist and Bordeaux Cellars did not maintain custody of the wine purportedly securing the loans.
“Instead, the defendants used incoming loan proceeds to make fraudulent interest payments to investors and for their own personal expenses.”
‘Duped investors’
Breon Peace, US attorney for the eastern district of New York, said: “Unlike the fine wine they purported to possess, the defendants’ repeated lies to investors did not age well. As alleged, these defendants duped investors by offering them an intoxicating investment opportunity collateralised by valuable bottles of fine wine that turned out to be too good to be true.
“This office and our law enforcement partners will work to protect investors from deceptive schemes and ensure that loans that are financed with investor funds are not stolen by fraudsters.”
Michael Driscoll, assistant director-in-charge at the FBI New York field office, added: “Burton and Wellesley, as alleged, lied to their victims to get them to invest in what ended up being a nearly $100m scheme.
“[The] indictment brings their criminal activity to light and reminds other like-minded criminals that illegal investment fraud schemes won’t be overlooked.”
The charges in the indictment are allegations, and the defendants are presumed innocent until proven guilty. If convicted, the defendants face up to 20 years in prison.
