How two men allegedly scammed investors with a history of rare wines

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The two Englishmen showed up at investor conferences in 2015 with a tempting offer. Participants were able to lend money, through their London-based wine broker, Bordeaux Cellars, to wealthy borrowers in distress who needed quick loans, no questions asked. Lenders would receive interest at a rate of 12 percent, paid quarterly.

Usually, such a high interest rate meant that the loan became tricky. Not so, the two men claimed – these loans were backed by prestigious wines from the borrowers’ cellars, which were transferred to air-conditioned, secure warehouses monitored by Bordeaux Cellars on behalf of the lender. And the loans would be capped at 35 percent of the market value of the wines.

“What happens in the event of a payment default?” asked Stephen Burton, the 57-year-old director of Bordeaux cellars, at a 2015 conference in Cancun. “We’re selling the wine, bearing in mind you only borrowed 35 percent of the value. It’s very easy to sell him fairly quickly.”

“Many clients are now cash-strapped developers,” said Burton’s partner James Wellesley, 55, at a 2017 conference in Las Vegas. “We only lend against investment grade wine…. We deal primarily in French wines, some of the nicer Californian wines [like] Screaming Eagle.”

A third member of the team, Lindsay Gundersen, told attendees at a Las Vegas conference in 2018, “We charge the borrower 16 percent, so they pay all the administrative costs…. Insurance, air conditioning, etc., are the borrower’s expense, not the lender’s.”

The promise of 12 percent no-charge interest to the lender on a secured loan in a time of record-low interest rates seemed too good to be true. And it was.

Last week, Burton and Wellesley, CEO and CFO of Bordeaux Cellars respectively, were indicted by a grand jury in a federal district court in Brooklyn on wire fraud and money laundering charges. Collectively, Burton and Wellesley are charged with inducing investors to invest “in excess of approximately $99.4 million in term loans allegedly brokered by Bordeaux Cellars,” according to the indictment.

“Unlike the fine wine they allegedly owned, the defendants’ repeated lies to investors did not age well,” said Breon Peace, US Attorney for the Eastern District of New York.

Burton and Wellesley (both have used multiple pseudonyms) were hit with a civil judgment by a London High Court last year involving the same plan to rip off at least 161 people. The men have been asked by their clients to pay back more than £56million in losses.

Burton told CNBC business reporter Jane Wells in 2013 that he got the idea for Bordeaux Cellars while reading Sunday times Items. “Here in London there was a pawn shop that had a warehouse full of Aston Martins and Ferraris. People literally just drove into this camp and gave them the keys for a cash advance. So I just put two and two together, and I thought, you know, we could do this with wine.”

The operation he created, which Burton passed on to Wells, quickly raised 200 loans worth $30 million. Burton even claimed that an American going through a divorce filed two dozen cases of Screaming Eagle to get “some quick cash.”

But Burton’s business plan is a head-scratcher. Why would a person rich enough to own two dozen cases of Screaming Eagle, Napa Valley’s most expensive cult cabernet, agree to chop their prize wine for a 16 percent loan? Surely there were better options.

In fact, there were no such borrowers. As their business developed, Burton, now with his partner and CFO Wellesley, focused solely on finding lenders willing to provide cash, falsely claiming they were waiting for borrowers, according to the indictment.

In addition, these putative borrowers were allowed to hide their identities behind individual corporate shells. More than 60 such grenades (the list starts with “Alsop” and “Apple Tree” LLCs and ends with “Zermatt” and “Zug”) were registered in Belize but controlled by Burton from London. The vast amount of paperwork that has to be prepared for the loans and is supposed to give an appearance of legitimacy appears to have been done by hired legal hands.

Some of the alleged loan money was used Ponzi-style to make interest and principal payments to lenders, according to the High Court complaint. The remainder was deposited into bank accounts associated with Burton and Wellesley and used to purchase wine and “gold, other goods and services”.

Seemingly cashless, Burton rose to prominence in London wine circles. “Stephen spent years driving around town opening crazy bottles,” said Alex Turnbull, then at wine company Justerini & Brooks and currently retail manager at Jeroboams wine spectators. “I once heard him say with confidence that he has the largest Penfolds Grange collection in the world. I told him I knew people who also had large Grange collections and said, ‘Maybe you should meet them.’ He got a little reluctant. So I’ve had my suspicions for a very long time, but working in commerce I found it difficult to express them or find anyone who would agree that everything seemed highly suspicious.

In 2019, quarterly interest payments to Bordeaux Cellars’ lenders were abruptly halted. An American investor sought advice from JustAnswer, a British online legal service. “I have invested in a company called Bordeaux Cellars in the UK,” wrote the investor. “In this investment, I am the lender of two loans and each loan is $100,000… I am supposed to receive interest payments quarterly and the last one was due on March 12th. I have not received the payment and have tried to contact Bordeaux Cellars several times and so far there is no response.”

“I did a little research,” the JustAnswer attorney replied. He had learned that the two loans were made to LLCs named “Gstaad” and “Pemberley” Investments, both of which are among 61 similar LLCs registered in Belize and named in the High Court civil action against Bordeaux Cellars. Noting that Bordeaux Cellars “has no trading history” and “has not filed audited accounts,” the attorney advises the borrower that he has little recourse to recovering his funds.

Apparently, neither the inquiring victim nor the lawyer was aware that Burton had been arrested at a hotel in Kent, England, on Valentine’s Day 2019. In his room, police found two forged passports, expensive watches, bars of bullion and South African and British currency totaling nearly £1million. Six months later, Burton pleaded guilty to possession of forged passports and money laundering, and was sentenced to four years in prison.

Wellesley was arrested on February 4 and is currently in prison in England. The US Attorney for the Eastern District of New York is considering extradition. Wellesley has been convicted and imprisoned twice for financial crimes.

But Burton is no longer in custody. In 2020, he was released early from prison, apparently due to COVID-19 concerns. His current whereabouts are unknown.


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