In June 2022 the FBI closed down a whisky cask investment scam by arresting a British National. We talk a lot about due diligence when it comes to buying casks, so in this video Mark runs through the lessons to be learnt from this particular scam.
Whisky cask scams and how to avoid them
Lesson one: Owning your cask
Storage in a bonded warehouse means nothing if you don’t own the cask. The only way to assure you own a cask is to get confirmation from the warehouse where the cask is stored – usually through a delivery order. The protection from a bonded warehouse is only for the owner of the cask.
If you haven’t had confirmation from the warehouse that you are the owner of that cask then the cask may not exist or may not be in your name.
Lesson two: Is the company legitimate?
Just because a company appears legitimate doesn’t mean they are. It is easy and cost effective to register a company, create a nice website and film some videos in a set. You need to do more than a superficial search on companies house to check whether a company is legitimate. You need to be checking directors, locations etc.
One warning sign is to check for virtual offices and PO boxes as these can be set up to make it look as though a company has a prestigious London centre office when they are in fact working from anywhere they want.
Lesson three: Where are profits coming from?
If you have bought a cask from a company and they say they are only making a profit when you sell that cask you need to question how they are making day to day running costs?
This kind of thing can be a real warning bell for a scam. All companies are out to make money, that is how business works, but if a company is not being clear about their costs then that indicates they have something to hide.
Lesson four: This is nothing new
Scams in the cask industry have been about since the 1990s. It has always been easy to do because their is an imbalance of information between the public and the industry and there are multiple ways for scammers to work due to casks having to be matured in isolated bonded warehouses.
The reality is that the method for scamming people with casks hasn’t changed much since the 1990s, as this case showed. So make sure you learn from past mistakes if you are thinking of buying a cask.
And remember, if it sounds too good to be true, it probably is.