A British venture that purported to buy and sell cases of vintage wine is now facing allegations that it was a Ponzi scheme that may have duped investors out of at least $16 million. Bordeaux Fine Wines Ltd. ("BFW") was placed into receivership by a British court in December 2013, and a professional liquidator was subsequently appointed to investigate creditor claims that millions of Euros were unaccounted for. According to reports, British police have also begun an investigation.
Formed in 2008 by 24-year old Kenneth Gundlach, BFW was touted as a wine investment firm that promised investors substantial returns through the company's expertise in "carefully selected portfolios" of vintage wines. The firm listed its address at Portman Square, a prestigious location in central London, and used high-pressure sales tactics, such as cold-calling, to reach potential investors. Investors were also assured that their wines were being stored at the prestigious London City Bond. By its own accounts, the operation was highly successful - taking in over $25 million per year in 2011 and 2012.
However, the price quoted for BFW's wines was allegedly 80% - 100% higher than an identical bottle at a normal dealer. Nor did BFW operate out of the prestitious Portman Square address - rather, the address was a mail drop rented for $50 per month, and its operations were located elsewhere. Additionally, Gundlach pocketed enormous sums as "dividends" from the company, receiving over $5 million on 2011 and 2012. Large amounts are also alleged to have been paid as commissions to salespeople and as fictitious returns to existing investors.
After an investigation by the British Insolvency Service, BFW was put into liquidation in December 2013 and a professional liquidator was appointed. Last month, a compulsory winding up order was issued by a British Court.