Protect Your Cask co-founder Felipe Schrieberg

Avoiding cask fraud

15 May, 2024

With whisky an increasingly desirable collectible, scammers are becoming rife. Oli Dodd speaks to the founders of a platform designed to protect private investors from being duped.

Over the past decade, rare Scotch whisky has become an attractive asset for luxury investment. According to the latest wealth report by estate agent Knight Frank, investment in the category has increased 280% over the past 10 years, and while rare bottlings now routinely break records at auction houses, it’s in the casks where serious long-term investments are found.

With a whisky cask, not only does an investor have an asset that will more than likely appreciate, but they have a tangible asset, with proven resilience, that can be controlled and influenced directly by its owner.

In 2022, stories broke about a cask of The Macallan, distilled in 1988, bought at the time for $6,275, forgotten about for decades before fetching almost $1.3 million at auction becoming the most expensive cask of whisky ever sold – how could you not want a piece of the action?

Well, many do. And a cursory Google will produce dozens of websites and articles describing success stories and promising returns for casual private investors who may have little-to-no experience in the world of whisky. But this is a market that remains unregulated and where there’s opportunity, there are those looking to exploit it – both ethically and less so.

“Whisky is a desirable collectable, so people are going in and trying to find the opportunities from that,” says whisky writer and Keeper of the Quaich Felipe Schrieberg, who alongside whisky broker and consultant Mark Littler, has launched Protect Your Cask, an educational platform which aims to prevent cask fraud.

“There are whisky brokers that have been in business for years, that operate in a legal and ethical way. But there are people who purely operate in an unethical way and that’s a serious problem because, potentially, there’s a reputational car crash coming for Scotch whisky as there are more and more stories about scams.”

Schrieberg continues: “There are lots of stories but it’s been tricky to get people to want to talk about specific things or name names. There are known firms that, if there’s the slightest indication they might be implicated in something dirty that they’ve done, they’ll bring in the lawyers. That’s intimidating for anybody. But you hear things, people are talking and conversations are being had within the industry. That’s why it's becoming more of an issue, as people have been talking about it more and more for years.”

It’s difficult to exactly identify the prevalence of whisky cask fraud. Talk on the inside over a few drams indicates that the issue is widespread, but beyond estimates hard data is difficult to parse and anyway, a good scam is by nature difficult to detect. What is clear is that while investment in whisky has been in overwhelming growth for the past decade, recent data shows the market has already begun to cool off. The 2024 Knight Frank Wealth Report describes an asset class that fell 9% in 2023.

Types of rules

Cask fraud itself isn’t particularly varied in its manifestation. When we talk about cask fraud, generally we talk about two things. “The first one is to do with ownership,” explains Schrieberg. “When you buy a cask, do you actually own the cask? Is it in your name? The rules around this are actually pretty clear – it can be boiled down to, if you buy a cask, you need to be able to be in contact with the warehouse, so that you can talk about that cask.

“Now, if you call that warehouse, and they don’t know who you are, but have an owner’s title with a firm’s name on it, you don’t own the cask, the firm does. When firms start going bankrupt, or all of a sudden the money disappears and people don't know what’s going on with their casks, we’re going to see the consequences.

“The second type of cask fraud – much less clear in terms of the law – is the fact that people are being sold a cask, they may even get the right documentation for them, but they paid too much. This constitutes fraud, but it’s hard to prove as fraud in a court of law. At the beginning of the 2000s you had a wave of firms that were doing just that, selling casks legitimately at what were then overpriced prices and they would get caught out – some of these firms got shut down.

“These firms are infamous for doing what they did. And right now the scale at which people are being sold casks at insane prices makes the early 2000s look like nothing. There are really, really unremarkable casks being sold for absolutely silly prices.” While this second type of fraud is more difficult to prove, it’s not without legal precedent. In the early 1990s, a firm called Cavendish Wine Merchants, which later became the Gibraltar-based Hamilton Spirit Management Company, was found to have been buying casks of Ledaig and Tobermory for £300 and selling them on for £990, grossing £6.2 million from investors in the process. Ultimately, the company’s two directors, Lewis Daulby and Lee Rosser, along with a sales manager, Julian Blee, were found guilty of fraud and sentenced to prison time.

But while convictions do happen, it’s not common, so rather than enter the nebulous and potentially litigious end-product of fraud, with Protect Your Cask, Schrieberg and Littler aim to tackle the issue upstream and help equip potential investors with the information to enter the category safely.

“If people Google ‘cask investment’, we want them to see our site,” says Schrieberg. “Anybody who owns a cask or wants to buy a cask, we just hope that when you’re trying to find out more, you're finding the right information. And this is us wanting to provide correct information based on law and on the guidance from the Scotch Whisky Association, as opposed to guidance that we have seen from firms, which is just waffle – we certainly don't want people to think that they are going to get that 18-20% annual rate-of-return-on-investment garbage.

“The Scotch whisky community relies on informal relationships and the assumption that whoever you’re dealing with has integrity. But when you have people come in without integrity and decide that there’s money to be made through breaking the law, on top of being a criminal, you’re disrupting this industry and community.

“This community has been built on trust, it’s why whisky producers are more than happy to share their secrets with each other. That’s just part of the culture, that’s partly what makes me love this industry and fraud is a threat to that.”

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