Two men cheated wine investors out of $99 million in Ponzi scheme, US says

In an elaborate Ponzi scheme that lasted nearly two years, two British men persuaded investors to make nearly $100 million in loans to wealthy wine collectors, federal prosecutors said.

But those collectors never existed, prosecutors said, and neither did the extensive reserves of valuable wine that the men promised to secure the loans.

Stephen Burton, one of the men who prosecutors said led the scheme, pleaded not guilty Saturday in federal court in Brooklyn to charges of fraud, fraud conspiracy and money laundering. Mr. Burton, 58, had been extradited from Morocco to the United States, where he was arrested last year after he was caught trying to enter the country with a fake Zimbabwean passport, prosecutors said.

James Wellesley, 56, is accused of conspiring with Mr Burton. He was arrested last year and remains in extradition proceedings in Britain, prosecutors said. If convicted, the defendants each face up to 20 years in prison.

John S. Wallenstein, Mr. Burton’s attorney, said Saturday that Mr. Burton denied the allegations. A lawyer for Mr. Wellesley could not be reached for comment on Saturday.

Mr. Burton and Mr. Wellesley were the CEO and Chief Financial Officer at a company called Bordeaux Cellars, according to the indictment, which was filed in February 2022. From approximately June 2017 to February 2019, the indictment said, they approached investors in the United States and other countries, some of whom were New York residents, claiming their company was making loans to wealthy wine collectors.

The men, using various aliases, told investors that the loans would be backed by a vast wine inventory stored at Bordeaux Cellars, including thousands of dollars’ worth of bottles from Domaine de la Romanée-Conti in Burgundy and Château Lafleur in Bordeaux, and that the men According to a criminal complaint filed in 2020, investors would receive regular interest payments from the wine collectors.

But Bordeaux Cellars owned thousands fewer bottles of wine than promised, the indictment said, and its executives used the lenders’ money to make interest payments to other investors and to line their own pockets.

According to the indictment, the scheme collapsed in February 2019, when Mr. Burton and Mr. Wellesley stopped paying interest to investors.

Mr. Burton “will now taste justice for the wine settlement scheme alleged in the indictment,” Breon Peace, the U.S. attorney for the Eastern District of New York, said in a statement Saturday. “This prosecution sends a message to all perpetrators of global fraud that you can escape law enforcement, but not forever.”