Whisky investment fraud ‘serious organised crime’
A series producer who worked on the recent BBC Hunting the Whisky Bandits documentary and podcast described cask investment fraud as “serious organised crime”.
Last night (22 April), award-winning journalist Felipe Schrieberg and independent whisky broker and editor-in-chief of The Whiskey Wash blog Mark Littler – who together founded the Protectyourcask.com website a year ago – interviewed Laurence Cook, series producer on the BBC Disclosure show and podcast Hunting the Whisky Bandits, which delved into the world of Scotch whisky investment fraud.
Cook claimed: “The way that the companies that we featured operate is serious organised crime. They are working to defraud people, and they’re doing it in a very organised manner, and they’re taking large sums of money. That’s kind of the basic thesis of the project for us.
“We set out with the best of intentions to find people who maybe had bad business practices, or careless, but in actual fact, what it seemed is that people had the intent to use whisky as they had in past guises, and with past names used other commodities to take the money and run, basically.”
Schrieberg stressed the importance of the documentary and investigation as it was the “first time hearing from victims” of whisky investment fraud. He added: “The bedrock of whisky cask ownership is you have contact with the warehouse, and the warehouse knows it’s you.”
Schrieberg asked Cook how much social media has played a role in the growth of Scotch whisky cask investment fraud, to which Cook replied “massively”.
Cook continued: “I think the sophistication which the companies that we looked at operate on social media is, I mean, it’s truly impressive. I know that they’re people with bad business practices and they want to defraud people, but these are people that can build slick websites, slick social media profiles. They are people that are committed to creating content that is targeted.”
‘None of them are schmucks’
He explained how in the past – as recently as 10 years ago – sales would have been attempted via cold calling. However, social media has become a tool used by potential investors to seek out cask investment firms – lightening the workload for investment companies, legitimate or otherwise.
“The victims [we spoke to] were people that were interested in whisky investment,” Cook explained. “For the most part, they were people who are hugely passionate about whisky and wanted some involvement in it. Or, they were people who had been targeted by ads telling them that whisky was a brilliant investment, offered great return, excellent exit opportunities, as much money as you like, 10/15% guaranteed. So it’s an entirely different landscape from the cold call version of things.
“And that’s really important because none of the [victims] that were featured, and none of the ones that we spoke to for background research, none of them are stupid people. None of them are schmucks. These are intelligent people who have spent their lives making sensible financial decisions, but they’re people that have been basically groomed into believing that this is a great thing. I would say social media plays a role in that. The advertising plays a massive role.”
The trio also flagged how some of these firms are using sponsored content and advertising with legitimate sites to increase their visibility and trustworthiness.
Cook noted: “There are companies that we featured that had paid for content that said the ‘top 10 alternative investments’, or whatever. Now, they’re featured companies that are part of our investigation, and they’re still up. Those advertorials are still up.
“Right now, it’s just easier than ever to position yourself online as a legitimate and respected and established company, and that’s the thing that when people arrive at your website, and click enquire and get the phone call, you have already skipped five or six psychological jumps. You’ve already got somebody who is ready to invest and interested. And you can manipulate them through to the investment.”
How, then, can the industry work together more effectively to weed out the scammers, and allow honest businesses to operate?
They collectively agreed a social media crackdown would not be the answer.
“You can report ads, but honestly, we’ve seen how far that goes,” said Schrieberg. “It’s not been very effective at all. You can report bad ads, the ASA [Advertising Standards Authority] is aware that there’s a lot of people saying some garbage about risky investment, but even then, I’m still bombarded by the ad saying the same lies.”
Do distilleries need to do more?
One viewer asked if distilleries themselves should do more to get information out there.
Schrieberg said: “Yes, but it’s not just distilleries, though, it’s got to come from the industry. Nobody wants to take responsibility – it’s really, really frustrating. I mean, I think, personally, it’s got to be the SWA [Scotch Whisky Association] in my opinion.”
He added: “As Laurence is showing, it’s getting to the point where it’s really too much of an issue. Great whisky relies on honesty, integrity and transparency. The best stories come from this. The reason we fell in love with the industry comes from this.
“The best distilleries very much value these principles; [but] all of a sudden, we’re seeing something that undermines it on every single one of these points. And because the SWA is to protect the values that make Scotch whisky great and therefore keep it as a valuable product held in highest name around the world, they should be weighing in. That’s my opinion. And there is a good debate to be had about that, but the industry has got to do more. It’s got to come from the industry.”
Littler added: “The problem is it’s still nuanced. You can’t say that cash investment is good or bad. It’s just not that simple.”
He continued: “To the other comment, as to whether the [whisky] downturn is playing a part to a degree, I mean, the downturn is fairly recent. We were seeing these companies pop up before, but what we are seeing with the downturn is we’re seeing organisations, prize bodies, festivals that previously probably wouldn’t have touched these people, taking their cash all of a sudden. And because brands are cutting their marketing budgets, brands don’t want to spend anymore, these are the places that are happy to give you their cash, therefore reinforcing the vicious cycle.”
Watch the full discussion via the video below.
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