The rise of wine investment recovery room scams

These fraudsters prey on those who have already fallen victim to a wine investment scam.

Regular readers will know that I've warned more than once about wine investment scams. It's always the same old script read by a young man with a posh sounding name, against the background noise of several other identikit males doing exactly the same.

It's that “great vintages are really limited” and “the Chinese are now so rich they buy the most expensive wine and mix it with Coke to show their wealth” sort of thing.

But it's a successful scam, as across the country there are tens of thousands of wine scam victims who have been ripped off to the tune of a few hundred millions, buying either non-existent or extremely overpriced booze. The fraud has been going for some twenty years – it's now usually claret (Bordeaux) but it has taken in port, champagne and malt whisky.

Now, however, there is a new danger - the wine scam “recovery room”.

What is a wine scam recovery room?

This is where known victims are promised that they can be reunited with both their initial investment and their promised gains – hence the “recovery”. This racket has only just started to emerge from the wine scam community.

But it is old hat in the world of boiler room shares where fraudsters, armed with a list of previous losers, cold call saying they can recover initial cash and more. There is, so they say, a buyer for the shares, willing to pay top dollar prices even if everyone else thinks the stock is worthless.

These calls often find recipients even more ready to accept what they are told. It's understandable. Firstly, victims clutch at straws. Secondly, it validates their decision. If someone wants to buy their shares, it shows they were not stupid after all as someone is prepared to pay even more.

The fly in the ointment is that the recovery room will demand a series of upfront "processing”,“legal”,“transfer” and other fees to ensure the victim is recompensed. It is, of course, the usual story of throwing good money after bad.

The wine recovery room story is a carbon copy. The victim already believes in the original story so when someone says they can find a buyer, they fall for the scam, pumping yet more cash into the fraudsters' pockets.

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Shutting down the scammers

One wine recovery room was recently shut down in the public interest by the Insolvency Service.

Capital Bordeaux Investments Limited started life in April 2012, selling wines that it could not possibly have owned or put into bond as they were still in the barrels back in Bordeaux and would be unlikely to arrive in the UK until early 2014.

Then, thanks to adverse publicity on investdrinks.org and elsewhere, it decided to give up selling non-existent wine and moved to a recovery room operation. The firm, which had one director – a 24-year-old who had no idea what was really going on - operated from a smart sounding City of London address (a maildrop).

It targeted previous wine investment victims and, to quote the Insolvency Service, “falsely represented that it could assist them in recovering their losses. Instead, the company solicited further investment from these victims on the basis of false and misleading information. Investors were told that the company would be able to recover and sell their previous wine investments - even if these were made through a company which had gone into liquidation.”

The catch was that the investor was required to buy more wine through Capital Bordeaux Investments. You'll be surprised to hear the claret did not exist. Capital Bordeaux and an associated company are now out of action. Together they ripped people off to the tune of £243,980 according to the Insolvency Service.

It may have been much more – scam companies rarely keep accurate accounts.

Don't fall for it in the first place

Colin Cronin, an Investigation Supervisor with the Insolvency Service, said: “These companies cynically targeted people who had already lost money in other wine investment scams and exploited their desire to try to recover some of their original investment. The companies were incapable of recovering such losses. Significantly, none of the funds received from investors were used to buy wine and were instead used for the benefit of those in control of the companies.

“I would urge victims of wine investment scams to exercise great caution if approached by companies which purport to be able to assist in recovering their past losses.”

I would go further than “exercise great caution”. No one has ever made anything other than losses from wine investment cold callers. And that goes for wine recovery rooms as well. So the only way for investors to ensure they protect themselves is not to be suckered in in the first place.

Capital Bordeaux is now a shut down recovery room. But there are – and will be – others working a similar scam. And who knows if some racket firm is not already working the Capital Bordeaux customer list to soak some more cash from gullible victims?

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