Whiskey & Wealth Club ‘misrepresents’ SSB ruling

The Texas State Securities Board (SSB) said it was ‘disappointed’ with the Whiskey & Wealth Club’s ‘slanted and unnecessary portrayal’ of its cease-and-desist order against the cask wholesaler.

The US securities board issued the emergency order on 2 November, claiming the London and Dublin-based cask wholesaler was engaging in fraud by offering securities and making statements to deceive the public.

The SSB alleged the investments tied to pallets of whiskey had not been registered by qualification, notification or coordination, and no permit had been granted for their sale in Texas.

The demand was contested by the Whiskey & Wealth Club, and after submitting sufficient information, the Texas agency agreed to dismiss the order on 7 July.

In a press release issued by the Whiskey & Wealth Club regarding the dismissal, the cask wholesaler said the SSB had ‘withdrawn all of its seven unfounded accusations’. The company called the allegations ‘deeply flawed’.

Furthermore, it noted that the ruling said that Whiskey & Wealth Club did not engage in securities investment or trading under US law.

The new order states that Whiskey & Wealth Club cooperated with the Enforcement Division by providing relevant records and information about its business.

Co-founder Jay Bradley said in the release: “The securities board shot from the hip and asked questions later in what was an ill-advised solo run. The board has now rectified its mistake and recognised our substantial co-operation with the investigation. The retraction and dismissal of the case is the closest thing to an apology that we are going to get.”

Bradley said the case had “cost a significant amount of money in legal fees, drained resources, and defamed our company”.

Co-founder Scott Sciberras added: “We believe the US practice of issuing a damaging press release on the same day as a legal order, without seeing or hearing any evidence, even going as far as to accuse a company of fraud ­­– and then retracting all of those allegations eight months later, could have a disastrous impact on most businesses. This kind of legal and public relations strategy is unheard of in Ireland, the UK, or Commonwealth countries.”

SSB statement

In response to the Whiskey & Wealth Club’s comments, the Texas SSB’s securities commissioner Travis Iles said the agency did not ‘retract false allegations’.

The statement said: “To the extent that the company’s characterisation of the resolution suggests otherwise, it is misrepresentative of the facts and circumstances related to the administrative proceeding and its resolution.”

The SSB also argued that the emergency order was ‘supported by evidence and merited given the manner in which the respondents, directly or indirectly, were marketing a securitised investment in the United States and Texas specifically’.

The government agency added that the new order, which ended the emergency cease-and-desist order, was ‘conditioned on the company undertaking to refrain from certain practices that would trigger securities laws, including anti-fraud provisions’.

The statement continued: “Implicit in the resolution was the respondents’ acknowledgment that they would no longer sell securities in the United States unless certain securities requirements were satisfied.”

In response to Bradley’s comment, the SSB said it ‘certainly does not apologise for working in good faith with the company to assist them in becoming compliant with applicable securities laws’.

‘No evidence’

Whiskey & Wealth Club issued a statement in regards to the Texas SSB’s comments.

The company said: “Stating that the original order is dismissed and set aside clearly means that the original allegations were retracted and that the case against us was ultimately thrown out.”

In response to the board claiming the order was supported by evidence, the cask wholesaler said it was ‘never presented’ with any evidence before or after the cease-and-desist order.

The statement continued: “We presented our business model to the TSSB early this year. It took until July for the TSSB to conclude that there was no evidence to support the original allegations and therefore a new order was warranted to dismiss and set aside the previous order. This was despite numerous and repeated communication to the TSSB via our lawyer that the bad publicity was putting a huge financial strain on our business.”

Whiskey & Wealth Club continued to reiterate that it has never sold securities. The firm said: “If it was found that we had been involved in selling securities the TSSB would have prosecuted us accordingly. Instead, they came to the conclusion that their original accusation was false and correctly issued a new order to dismiss and set aside these allegations. As such, we could not acknowledge to discontinue something that we have/had not done.”

Undertaking agreement

As part of the new order, Whiskey & Wealth Club also agreed to review its marketing materials and purchase contracts in an undertaking agreement.

The undertaking order, signed by CEO Sciberras, stipulates that the company will remove or revise certain statements in marketing materials.

This includes statements that engage in efforts either before or after the sale of casks to purchasers to increase the return potential of the casks being sold, and providing advice on the investment return potential of sold casks.

The company also agreed it would not enter into purchase contracts with US consumers that included requirements that the buyer holds a cask for a minimum time period or that the purchaser will sell any casks to or through Whiskey & Wealth Club.

It also stipulated that it must not contain a promise of a minimum investment return or other guarantees regarding the future value of the purchased cask.

Whiskey & Wealth Club agreed to continue to cooperate with the Enforcement Division by producing information relevant to the signed undertaking. The company also agreed to hire a compliance officer.

In regards to the undertaking agreement, Whiskey & Wealth Club claimed that the company was not ‘required to update, change or amend any of our operations or processes in order to agree to the undertaking’. It also alleged that its current business model is ‘identical’ to its model prior to the cease-and-desist order.

The statement continued: “We have willingly opened our business to the TSSB and showed them all of our operations – from cradle to grave in a successful attempt to help resolve their misunderstanding.

“Indeed it was through this show of transparency on which the TSSB reached their conclusion that their original allegations were false.

“For reference we take our compliance obligations incredibly seriously and this is demonstrated by the fact that we employ a compliance team and have done so for over two years – long before any dealings with the TSSB.

“Although this has been a difficult time for us, the knowledge that we had done absolutely nothing wrong gave us the confidence and belief that we would ultimately be vindicated and the truth would prevail.”