Fine Wine Investment: Why Are Fine Wine Scams Aging Just as Well?

On the 24th of October, Craig Cooper and Jeffrey Kushner became the latest additions to a lengthening list of wine fraudsters. Faking fine wine is an age old practice, with accusations of forgery dating back to antiquity.

But the disqualification of Cooper and Kushner, directors of Crimson Fine Wines Limited, has lead to trust in the market reaching an all time low. The two men have been banned from acting as directors after their fine wine investment company was found guilty of scamming its customers out of nearly £1 million.

Recently listed as one of the top performing passion investments, fine wine can be lucrative. But investors should remember the dangers of this long term commitment: few markets are as rife with fraudsters, and dodgy wine brokers can seem legitimate.

Fine wine is a luxury asset that’s particularly susceptible to fraud. You can’t slap the grill of a 1932 Bugatti Royale Kellner Coupe on a modern hatchback and claim it’s a classic car worth a fortune. But well forged wine bottles can fool anyone, from a new investor to a world expert.

The problems that have plagued the wine industry for centuries are easy to explain, but difficult to solve.

Wine fraudsters can be persuasive

A well publicised case which resulted in the ten year incarceration of Rudy Kurniawan threw some light on how a practiced fraudster might operate. A personable approach and a lavish lifestyle helped to conceal Kurniawan’s grand scam, in which, amid years of duplicity, he sold $24.7m of wine at a single auction in 2006.

Fraudsters often operate carefully. Those with a sound knowledge of fine wine can rely on inconspicuous methods to deceive investors. The London Wine Cellar, in their guide to fine wine investment explain that “Anyone promising you quick results is not to be trusted.” A company who charge commission upfront, rather than at the point of selling, should be treated with suspicion. As wine is a long-term investment, this move, which might seem like procedure, isn’t in the investor’s interests.

Fine wine can be faked

Fine wine is forgeable. Labels can be changed, old wines can be mixed with new, corks can be replaced, capsules can be swapped. Even an expert might be duped by a carefully produced replica.

The techniques used by wine fraudsters are precise and often effective. Kurniawan was mixing old wines of a fair standard with newer pinot noirs, passably recreating the taste of an authentic bottle. Then, he would use a combination of corking tools, vintage bottles, counterfeit labels and tasting notes to create a highly convincing impression of a genuine fine wine.

Geoffrey Troy, a wine merchant in New York who became suspicious when Kurniawan bought a standard of wine that, while good, wouldn’t be considered by a serious collector, has explained how the con man “could take a $200 bottle and turn it into over a $1,000 bottle.”

Executed inexpertly, some illicit techniques could be detected by the naked eye. A label that doesn’t seem to match the wine’s period, a capsule made from foil rather than wax, a cork with the wrong font or shading, glass that looks a little too new, liquid of the wrong colour - all of these signs should prompt alarm bells.

Tackling wine fraud

Whilst a forger can make mistakes, often a fraudulent wine is virtually undetectable. Luckily, technology is stepping in where human judgement falls short. New innovations are the fine wine industry's greatest hope of eradicating malpractice.

Ground-breaking chip technology, which can help prevent old bottles from being reused, has been introduced by Selinko. The company are collaborating with Laurent Ponsot (owner of Domaine Ponsot, a wine producer in Burgundy) to reach a solution that will strengthen the protection of Domaine Ponsot’s Premiers Crus and Grands Crus.

Ponsot’s bottles will now have a digital identity via the Selinko platform, allowing their authenticity to be controlled. Patrick Eischen, CEO of Selinko, says that “Near Field Communication (NFC) technology was quickly identified as the best solution that could meet all of Laurent Ponsot’s requirements and that could naturally combine respect for tradition and innovation.”

Blockchain is another technological means of authenticating fine wine. A solution offered by Everledger and world-renowned wine expert Maureen Downey, blockchain creates a permanent, digital representation of a bottle. This record then acts as a verification point when the bottle changes hands.

New technologies are offering a ray of hope in an industry that, until now, felt impossible to regulate. Whilst the history of fine wine may have been riddled with fraud, the future should tell as different story, as technological ingenuity ensures the preservation of an ancient tradition.