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Two British citizens have pleaded guilty in a US court to defrauding wine investors of around 99 million US dollars (85 million euros). James Wellesley and Stephen Burton (picture) allegedly claimed that the money invested in their company "Bordeaux Cellars," founded in 2010, would be used for short-term high-interest loans. These were supposedly secured by rare wines of the borrowers, which were stored in climate-controlled warehouses of "Bordeaux Cellars." They would be sold if the borrowers did not repay their debts. However, neither the alleged borrowers nor the wines existed. The two used the money for personal expenses and to pay interest to some investors. Wellesley now faces up to twelve years in prison, while Burton faces up to 29 years. In court, Burton admitted that they had never owned more than 217 bottles.
"Bordeaux Cellars" was a classic Ponzi scheme, where repayments are only possible through new investments. As soon as more investors demand their money back than new ones deposit, it collapses. As Wellesley recounted at a conference in Las Vegas in 2017, the alleged borrowers were primarily real estate developers who needed short-term liquidity. For this, the lenders were to receive twelve percent interest quarterly. Wellesley and Burton appeared at investor conferences and wine tastings, boasting about their wine collections. They allegedly owned a cellar of 25,000 bottles with rarities like Domaine de la Romanée-Conti and Screaming Eagle.
Burton agreed to repay 26 million US dollars (22 million euros) from the fraud. One million dollars, balances on several bank accounts, and all wines were confiscated from Wellesley. He had previously been convicted multiple times for fraud and embezzlement and had lost his law license as a result.
(al)
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