Both Bordeaux Cellars defendants plead not guilty

The second defendant to be extradited to the US to stand trial on charges of defrauding individuals into taking out loans backed by collections of fine wines as collateral has been named. He has pleaded not guilty. The alleged fraud, carried out under the company name Bordeaux Cellars, resulted in losses of around US$100 million (c.£79 million) between 2017 and 2019.

The first to be charged was Stephen Burton, who was extradited from Morocco in December 2023. The second defendant, James Wellesley, also known as James Fuller, recently lost his legal battle against extradition from the UK. He entered his not guilty plea in July before a judge in Brooklyn to charges of wire fraud, conspiracy to commit wire fraud, and conspiracy to commit money laundering. Both defendants face up to 20 years in prison if found guilty.

According to the prosecution, Burton and Wellesley told investors that Bordeaux Cellars brokered loans between them and high-net-worth wine collectors, using valuable wine collections as collateral. They also promised that investors would receive regular interest payments from the borrowers.

However, according to the prosecution, the “high-net-worth wine collectors” did not actually exist and Bordeaux Cellars did not maintain custody of the wine purportedly securing the loans. Instead, they allege, the defendants used incoming loan proceeds to make fraudulent interest payments to investors and for their own personal expenses, pocketing US$99 million along the way.

Commenting on the case, Roger Isaacs, National Technical Director of NIFA said: “This appears to have been what is known as a Ponzi Scheme in which money duped from new investors is used, in part, to fund what are purported to be investment returns to those who invested early on.

“In simple terms, suppose a fraudster tells an investor that an investment scheme can deliver an profit of 25% every month.  The investor invests say, £1,000 and after a month the fraudster returns £250 to the investor pretending that it is the profit on the investment.  In reality it will simply be a quarter of the funds originally invested and the fraudster will have spent the other £750.

“The fraudster then seeks to persuade the investor to encourage others to invest, thereby generating new funds that can maintain the illusion of ongoing profits.  Eventually the pyramid will collapse with those investing most recently typically suffering the largest losses.

“Often forensic accountants are brought in to explain to the courts how these types of scheme have operated and no doubt they will already have been hard at work following the money in the Bordeaux Cellars case.”

Sources: Times

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