Empty bottles: Alleged mastermind of $100 million wine fraud extradited to U.S.

These wines didn’t age well.

The alleged mastermind behind a fine-wine investment strategy prosecutors say was actually a $100 million Ponzi scheme has been extradited to the United States to face criminal charges.

Stephen Burton, 58, of the United Kingdom, was flown to New York from Morocco on Friday to be arraigned on charges of money laundering and wire fraud for a yearslong scheme that allegedly involved providing high-yield loans backed by ultra-high-priced wines that didn’t exist.

Burton, who had used the aliases Andrew Pittman, Robert Allison and Derek Campbell, was arrested in Morocco in 2022 after entering the country on a phony Zimbabwean passport. His co-defendant, James Wellesley, 56, was arrested around the same time in the U.K. and has been awaiting extradition from there since.

“[Burton] will now taste justice for the fine wines scheme alleged in the indictment,” said Breon Peace, the U.S. attorney for the eastern district of New York. “This prosecution sends a message to all perpetrators of global fraud that you can run from law enforcement, but not forever.”  

Messages left with attorneys for Burton and Wellesley weren’t immediately returned.

Prosecutors say that from 2017 through 2019, Burton was the chief executive of Bordeaux Cellars, an investment scheme based in the U.K. and Hong Kong that pooled money for high-yield lending to people who had high-priced wine as collateral. Over the years, the men said they had amassed a cache of high-priced bottles of wine worth millions in a storage facility in London.

According to court filings, Burton and Wellesely would approach wine connoisseurs at investor conferences and sales shows and pitch them the scheme which they said would yield 12% interest by lending to high-net-worth individuals who needed quick access to cash.

They claimed that they would only lend up to 35% of the value of the millions of dollars worth of wine held in storage and that if borrowers defaulted, they would just sell the wine so investors would never lose their money. The pair claimed they had lent out $152 million in such loans over the course of six years.

But investigators say Bordeaux Cellars never held much of the wine it claimed to own and that most of the money they took in was used to pay out earlier investors and to finance their own lifestyles.

In all, prosecutors say the scheme took in $99.4 million in investments, and that $8.2 million of it went missing when the scheme collapsed in February 2019.

Many of the hundreds of alleged victims were in England but others were in the United States, prosecutors said.

When Burton was initially arrested in England in 2019, investigators say they found nine kilograms of gold ingots and coins, expensive watches, banking cards, more than 500 lottery tickets, more than £53,000 and €14,000 in cash and false identification documents. 

Burton was later released from jail in 2020 due to Covid-19 concerns but then allegedly fled the U.K. using the false Zimbabwean passport, officials said.

This post was originally published on MarketWatch

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