Stephen Burton, 57, and Andrew Fuller, 55, face up to 20 years behind bars if they are convicted of duping the collectors.
They set up a company called Bordeaux Cellars to conduct the alleged scam. It offered investors the chance to earn high returns by making collateralised loans secured against rare bottles of the world’s finest wines, including Domaine de la Romanée-Conti and Screaming Eagle.
However, the returns were ‘too good to be true’, according to court papers filed in New York by US district attorney Breon Peace. The court documents allege that Bordeaux Cellars did not actually hold many of the wines.
A Ponzi scheme – named after infamous 1920s fraudster Charles Ponzi – aims to continually reel in investors and use their money to pay out interest to earlier investors.
Burton and Fuller are accused of using bogus wines as collateral for loans from newer investors, which they used to make fraudulent interest payments to earlier investors. All payments abruptly stopped in February 2019, sending investors into a panic.
‘Unlike the fine wine they purported to possess, the defendants’ repeated lies to investors did not age well,’ wrote Peace, the US district attorney, in papers filed with the Easter District Court of New York. ‘These defendants duped investors by offering them an intoxicating investment opportunity collateralised by valuable bottles of fine wine that turned out to be too good to be true.’
Both men have previous convictions for fraud. They are accused of faking aristocratic connections in a bid to impress collectors.
The papers lodged in New York allege that Fuller changed his name to James Wellesley for the scheme. Wellesley is the surname of the Duke of Wellington.
They are alleged to have secured $99.4m (£76m) from investors by running the scheme, which ran from June 2017 to February 2019.
Burton was the chief executive of Bordeaux Cellars and Fuller was the chief financial officer. They are charged with wire fraud conspiracy, wire fraud and money laundering conspiracy.
Fuller, of Tunbridge Wells in Kent, has been remanded in custody in London’s Wandsworth Prison, with extradition proceedings underway.
Burton previously pleaded guilty to money laundering and false identity documents and was sentenced to a four-year custodial sentence. He has since been released and has reportedly fled the country.