Like any investing class, cask scotch whisky has seen its fair share of fraudsters and scammers who have preyed on the misinformed public. In this article we break down three of the worst whisky investment scams and what lessons to learn from them to avoid repeating past mistakes.
Windsor Jones, Charles Winn and Vintage Whisky Casks
The most recent whisky scam on this list. Casey Alexander was arrested by the FBI back in June 2022, being accused of defrauding $13 million from over 150 hopeful investors through the following companies: Windsor Jones, Charles Winn and Vintage Whisky Casks. Targeting elderly US citizens, Alexander used his knowledge of whisky and ‘British accent’ to charm potential investors to part with their money.
The exclusive targeting of US citizens was potentially a ploy to circumvent scrutiny. Although it all fell apart when an 89 year-old man from Ohio contacted the authorities, to report that he had been tricked out of $300,000. Other victims, when attempting to exit their funds were told that the company was restructuring and that they could not receive their money until it was concluded. Then, they heard nothing.
In a dramatic turn of events, the full extent of the London-based scheme was unveiled when an insider who had a previous securities fraud conviction, helped to reveal the facts to the authorities. The full details of this case are ongoing with the trial, as more will be revealed in the coming years. However, it is important to note, you should always be wary of companies that exclusively target investors outside of their home country as this can be an attempt to make it harder for law enforcement to pursue such fraud cases. Plus the short holding period of three years is a worry in and of itself, since it is extremely unlikely anyone will double their money in whisky in such a short period.
In the mid 90s, in many lifestyle magazines sat glossy adverts claiming guaranteed returns on casks of scotch. Upon making an enquiry, a man named Stephen Jupe from a Wandsworth based company called Marshall Wineries would be in touch making lucrative promises about the scotch casks from a Grandtully distillery. This pitch garnered Stephen Jupe almost £4 million from over 2,000 members of the unsuspecting public.
However, this was all smoke and mirrors. While Grandtully was a distillery at one point, it had closed down in 1914, meaning that what Jupe was selling was non-existent. In fact he had conned a Speyside distillery into selling him a large quantity of stock, without them knowing. He had inflated the prices and completely mis-sold his clients.
Stephen Jupe’s company filed for bankruptcy in 1996, years later he was found guilty on three counts of fraudulent trading and one count of using a prohibited company name. He was sentenced to five years in prison in 2004.
In the present Stephen Jupe might have had a much harder time in passing this scam off, due to a quick Google search revealing that Grandtully had closed down over a century ago. But if you are unsure of a company or cask investment, make sure to do your own research!
We must start by saying that nowadays, Nant is a highly respected (and delicious) whisky with a number of delightful expressions and under very different ownership. However, not so long ago Nant was embroiled in one of the worst whisky investment scams in history.
Back in 2008 the Nant distillery allowed over 900 investors to purchase casks of their whisky, with a guarantee that Nant distillery would buy back the casks. This was done so that Nant could quickly raise some capital, something that many distilleries do. Investors however, were promised a 9% guaranteed return on their investment, which is where things started to fall apart. Barrels were sold at $14,000 each with investors promised that they just needed to wait four years for the barrels to mature. Nant spent large amounts of money on lavish marketing campaigns to further push their investment scheme, at one point even hiring Australian Cricket legend Matthew Hayden to be the face of the brand.
Behind the scenes, things were far from rosy. The distilling team warned Nant bosses that production could not match the demand, meaning that many of the casks that had been sold were sitting empty, while others were non-existent entirely. This did not stop them from continuing to mislead investors as unpaid bills rapidly spiralled out of control.
Eventually Nant was forced to declare bankruptcy, leaving investors terrified of the status of their casks. A glimmer of hope arrived in 2017 as Australian Whisky Holdings (AWH) looked to takeover the struggling Nant, investors breathed a sigh of relief in the hopes that they could recoup their losses. All was not to be as AWH underwent an audit of Nant’s stocks, finding that over 700 barrels had never even been filled with whisky. Furthermore other barrels had been emptied and barreled without even bothering to notify those who invested in them.
In the end the ring leaders of the scam are still at large, and complications over the legal status of the whisky casks have meant clashes in jurisdiction between different Australian government departments. Unfortunately for their victims, it is unlikely their money will be returned. Nant itself is now owned by Australian Whisky Holdings, and they have done a lot to restore the reputation and quality of this former giant.
In the end be careful when investing and ensure your ownership documentation is both complete and accurate. Verifying your casks actually exist can be tricky, which is why at Hackstons we work with a third party auditing company on a bi-annual basis to ensure that our clients can rest easy in the knowledge that their casks actually exist and that they actually own them.
If you wish to find out more about how Hackstons is building trust in whisky investment markets through our firm ethical commitment to our clients well being, see the following page for further information. If you are interested in investing in cask whisky, contact us using the form below.