Cult Cabernet Crime

The two Englishmen began showing up at investor conferences in 2015, armed with an enticing proposition. Investors could, via a London-based brokerage, Bordeaux Cellars, lend money to wealthy borrowers who needed fast loans, no questions asked. The loans would carry a 16% interest rate. The lenders would receive 12%, paid quarterly.

- PETER HELLMAN

Normally, such a high rate of interest meant that the loan would be dicey. Not so, the two men claimed— these loans would be secured with prestigious wines from the borrowers’ cellars, transferred to climate-controlled, secure warehouses overseen by Bordeaux Cellars. “What happens in case of a default?” asked Stephen Burton, the 57-year-old head of the firm, at a 2015 conference in Cancun. “We sell the wine.”

“Lots of customers are property developers who are short of cash,” said Burton’s partner, James Wellesley, 55, at a 2017 conference in Las Vegas. “We only lend against investment grade wine …. We’re dealing with mainly French wines, some of the nicer California wines [such as] Screaming Eagle.”

The promise of 12% interest to the lender on a secured loan in an era of record low interest rates seemed too good to be true. And it was. Burton and Wellesley, CEO and CFO of Bordeaux Cellars, were indicted by a grand jury in a Federal District Court in Brooklyn, N.Y., in March on charges of wire fraud and money laundering. They’re accused of inducing investors to “invest in excess of approximately $99.4 million in term loans purportedly brokered by Bordeaux Cellars,” states the indictment.