The Whiskey Scam; Fraudsters Deceive Investors With Fictitious Rare Whiskies

Investment is the key to building a fortune. It is advised to diversify one’s investments to minimize the risk and optimize the returns. Most common people invest in stocks, mutual funds, gold, real estate, and other well-known asset classes. But richer segments of society are known to invest in exotic categories such as luxury watches, rare whiskeys, antiques, and many others. Recently folks from the upper middle class have also started investing in rare whiskeys, and since this is an unexplored area for many of them, fraudsters have found ways to dupe them and steal away their hard-earned money.

Investment in rare whiskey has been going on for ages and few of the collections have been sold for millions of dollars. A 1975 cask of Ardbeg single malt scotch was auctioned for a whopping 16 million pounds. Whiskey investment is easily found to give double-digit returns every year, making it a lucrative investment for those willing to grow their savings.

How Scammers Are Fooling the Investors

Scammers use several techniques to deceive new investors entering the rare whiskey industry. Some of the most common deceptive practices include:

- Fake bottles: To recognize a whiskey brand, one would first look at the bottle label. So to fool the investors, the fraudsters have started creating counterfeit bottles. The bottles have exactly similar packaging and labeling, making it quite challenging for new investors to identify any differences.

- Selling online: Fraudsters have resorted to e-commerce to sell counterfeit bottles. They display the images of the branded bottles and deceive the investors by providing false information. Once the investor makes a purchase, they ship the fake whiskeys. Since investors buy them to sell later, they don’t even open the bottles in most of the scenarios and discover the fraud much later.

- Bogus claims: A whiskey's cost and price appreciation depend on its origin and age. The fraudsters can sell fake whiskey by providing fake documents about its origin and time.

- Limited edition scam: Since rare whiskeys attract a higher price tag scammers often label them as a limited edition—one with very few bottles or casks remaining in the stock. Novice investors end up purchasing a fake one instead.

What Industry Experts Have to Say

Vicky Bruce, the founder of Casknet, a whiskey verification firm, researched the scam happening in the Whiskey industry. She said, “The issue is that because casks are marketed as investment opportunities, they aren’t regulated financial products, and the individuals offering these investments are not regulated by the Financial Conduct Authority.”

While some brokers and companies are involved in the fraud, some genuine brokers have expressed their concerns over the fraud fearing it might hurt the industry as a whole. Blair Bowman, a renowned whiskey broker said, “The sector has drawn in bad actors, including people previously involved in scams related to fine art and wine,”. He added, “My worry is the damage this could cause to the whisky industry. Naive investors might not realize they’ve been duped until five or ten years down the line when they want their returns but can’t reach the companies—the website is gone, and the emails don’t work. It’s going to be a real mess.”