The Ponzi’s scheme of Bordeaux Cellars

The Ponzi scheme always seems to be the best way to set up a scam. Whether it’s treasury bonds, bitcoins, or bottles of wine, the method invented by Charles Ponzi almost a century ago is always the most widely used by scammers. Look at what Bernie Maddoff did in the early 2000s.

It is a method that works, and initially the first customers can make some money. At some point they decide to get out and there is no more money, no more bonds, no more bitcoins or no more bottles of wine. The scheme is simple, you take money from new investors and use it to pay dividends to others. When so many demand their capital back, the system collapses and the originator usually runs away with the purse.

In the 1980s Stephen Burton was a 20-year-old from Tunbridge Wells in Kent, UK, with a passion for wine. He wrote on his Linkedin profile that he received his first bottle of Latour 1961 when he was only 21 years old, and that he had a private collection of more than 5,000 bottles.

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In 2009, he created Bordeaux Cellars, a company for trading fine bottles, operating as a broker between London and Singapore, where the company’s two divisions were based. Along with Burton was his friend James Wellesley, also a native of Tunbridge Wells, and the purpose of the company was to facilitate collectors in the purchase of fine wines by helping them obtain loans to participate in auctions and private winery sales. Since banks were quite averse to lending money for such activities, Bordeaux Cellars acted as an intermediary between collectors who needed liquidity to buy fine wines and the investors who provided the money, naturally receiving a rather high interest rate in return: we are talking about 12 percent at a time, until 2019, when interest rates were around zero.

When a collector purchased a batch of fine wines, the bottles would remain in Bordeaux Cellars’ warehouses until the loan was paid off. In this way the lenders had the collectors’ bottles as collateral, an asset that in case of need or default guaranteed a quick realization. A 2014 article in the Financial Times stated that Stephen Burton was expanding his business by seeking new storage facilities in Geneva to store wines from European customers. The notoriety of the labels stored in the…

'Wine' Roland Mucciarelli

Blogger+Podcaster about wine and technology driving Wine Business at the next level