How to spot a potential whisky scam or rip off
10 signs of a potential whisky investment scam or rip off
- 'Guaranteed' returns
- Bullying you for a phone number or email address
- Why are they rushing you to invest?
- Does whisky investing need to be regulated?
- How long has the company been trading?
- Basic details just don't add up
- Price, price, price!
- Is there proof of your whisky's origin?
- How do you get your money out?
- Any doubts, just stay out
Scam investments – whether for Scotch, gold, fine wine or art and antiques – leave a trail of financial misery for those who have been duped.
But with interest rates on easily accessible cash savings at near zero, fraudsters and rip-off artists are finding it ever easier to trap the unwary, because they need only offer high single-digit returns to entice those trying to grow their money.
So, how can ordinary investors gain the knowledge and experience to differentiate between a likely scam or rip off and a genuine investment opportunity?
This guide aims to help potential Scotch whisky investors better understand the vital questions to ask any investment provider, and how to spot something fishy.
It's not the rate of return but the promise or 'guarantee' which should ring alarm bells. Nothing is 100% safe in the financial markets, not even cash in the bank. That is why FCSC and FDIC insurance exists, so that savers can get back at least some of their money if their bank fails. Ignore any offers of 'assured profits'.
Bullying you for a phone number or email address
Reputable organisations should provide all required and relevant information on their website for all to see. If you can’t view available stock, price lists, fees and who is running the company without providing contact details to ‘learn more’ or ‘request brochure’, then ask yourself if you're ready for a barrage of sales calls or emails to get you to hand over your cash.
Why are they rushing you to invest?
If you do give your phone number to a scam, expect lots of urgent phone calls, trying to rush you into making a purchase. This classic 'boiler room' tactic is all-too common in rip-off investments, and the salesperson will claim that you've got to act quickly if you don't want to miss out.
But Scotch whisky matures slowly over many years, so you shouldn’t face any pressure to buy immediately. Take your time to review and check out any opportunity as it suits you. The contents of a cask won’t change significantly a couple of weeks later, and if the provider trying to sell it says they won't have any more stock to offer, how reliable or stable do you think their business sounds really?
Does whisky investing need to be regulated?
Maturing whiskies, like most physical assets, don’t fall under financial regulation, because they are already governed by simple and well-understood property law, such as Sale of Goods in the UK for instance. So, watch out for any organisation or scheme claiming that their whisky is a regulated investment. It might seem impressive, but does it actually stack up?
One regulation does matter however. The large sum of future tax revenues tied up in maturing Scotch means the government wants to know where it is and who's caring for it. So only those people and businesses that hold a certificate issued by HMRC under the Warehousekeepers and Owners of Warehoused Goods Regulations (WOWGR) are permitted to store and handle maturing Scotch whisky exclusive of VAT and Duty.
How long has the company been trading?
Since 2015, when WhiskyInvestDirect first enabled ordinary investors to own maturing Scotch whisky efficiently, there have been hundreds of attention-grabbing headlines proclaiming the returns on investing in Scotch.
Needless to say, these headlines have attracted investors to WhiskyInvestDirect and at the same time encouraged unscrupulous operators to try to make a fast buck on the back of these articles.
The good news here is that it is very easy to check up on companies using the free Companies House website to determine exactly how long a company has been established. You can also check out the directors and see what other businesses they may have launched in the past. Did they prove successful long-term? Or have they switched from one idea to another time after time, only to have the company dissolved?
Basic details just don't add up
Reputable companies publish their company number on their website and also provide details of who is directing the organisation and where they're based. Those details should then match those provided by Companies House.
If the Companies House overview, filing history and details of people involved are minimal, proceed with caution. Look further too. It only takes a few seconds to search LinkedIn or the wider internet to check a company's or individual's history.
Price, price, price!
Whilst researching this article we spent time on Google and Facebook looking for companies just like us offering “whisky investment”.
We discovered numerous organisations, many of which we dismissed immediately by simply applying the simple tips in this article. However, of those 16 companies that we examined in greater detail, the most common characteristic across all but one was that they didn’t publish their stock list and prices for all to see on their website.
This lack of transparency should cause any potential investor to ask why. These basic details are vital to you reviewing and judging an opportunity.
Why not show you what different whiskies they have available? Is it because they don't have a stable, reliable relationship with the Scotch industry for sourcing new stock in future, never mind selling it back for you?
More crucially, why hide cask purchase and sale prices and transaction costs? Is it because they quote different prices to different people, depending on what their sales-person learns about how much money you're looking to spend when they phone you with a high-pressure sales call?
Time after time, whisky investment scams – like scams in wine, rare coins, fine art or other 'collectibles' – come down to ripping people off by charging them far too much. Pay 2 or 3 or 4 times the true market value when you buy, and what hope will you have of ever getting your money back on sale, let alone making a profit?
Needless to say, WhiskyInvestDirect posts full details online of all its stock, with prices and costs clearly shown, ready for you to review as and when it suits you. This lets you compare our prices and costs against other offers and importantly see the live price you will receive when you sell. We think you'll find they are very much better than anywhere else. But you really should check this out for yourself. The No.1 thing scammers rely on is that you'll take them at their word. "Do your own due diligence" as chatrooms and forums say (DYODD).
Is there proof of your whiskies' origin?
Second only to rip-off prices, the biggest scam in physical assets like Scotch whisky is fake quantity or quality. Think of a gold bar that weighs a few grams less than advertised, or a Leonardo da Vinci which a forger painted only last week. How do you know that the whisky you’re buying inside the cask is what it claims to be, from the distillery described, in the volume you're paying for?
The history of an asset matters to its value. The word for this is "provenance", meaning proof of origin. It is clearly shown by a public Audit online for all the Scotch traded on WhiskyInvestDirect. This audit also proves that the quantity of maturing Scotch owned by our users actually exists, in full, safely stored and insured.
How does the Audit work? It posts online, for anyone to see, the full list of each customer's holdings. (Your holding is shown with an anonymous nickname, so no-one else knows it's you.) Against that, we publish the full list of all casks, held for WhiskyInvestDirect clients, issued to us by the specialist and independent warehouses we employ to care for them.
This achieves two crucial things:
First, the total quantities on each list – the list of client holdings, and the list of casks – match down to the last litre. They must reconcile like this, or there wouldn't be as much whisky in the warehouse accounts as customers had bought. You can check that the Audit is correct for yourself by studying and comparing the lists online. So can every other visitor to our site.
Second, this transparency also assures WhiskyInvestDirect customers that their maturing Scotch is exactly what it claims to be, because the warehouse lists show each barrel by distillery, date of filling, and type of wood, as well as by quantity.
Can this be cheated? No. We can't falsify the cask lists, because the warehouse companies are independent of us, and they can check we're publishing exactly the lists that they have sent us. Nor can we falsify the quantity belonging to clients, because that would mean changing at least one user's holdings on the Audit. Like you, they can all see and check that for themselves.
We don't know of any other whisky investment service which comes anywhere near this level of transparency or proof.
- See total stock volumes on the platform
- See prices to buy and sell 24/7 on the live order board
- See the Public Audit
How do you get your money out?
With hard-sell phone calls, it is all too easy to be hurried into buying a cask of whisky before you fully understand the process of how you will get your money out when you want to sell.
Look for the exits before you go in. You should think about this before making any investment. For maturing whisky ask these questions:
- Who will buy my whisky?
- Is there an active market for my specific whisky?
- When was the last time whisky like mine sold?
- What was the last price paid for whisky like mine?
- What are the costs involved in finding a buyer and selling my whisky?
When it comes to selling your whisky, a vibrant marketplace with live buying and selling prices, plus transparent fees, presents the quickest and easiest way to realise gains from your Scotch investment.
Any doubts, just stay out
If anything doesn't add up, or you feel at all rushed to make a decision, just stop. Take a breath, walk away. The distilleries of Scotland will continue to produce world leading spirit that takes years to reach maturity. So, you can rest assured that, if the company you're researching offers a serious and stable opportunity, there will be more delicious Scotch available for investment tomorrow.
A selection of whisky investment scam examples
- Nant whisky group
- On the rocks: The untold story of the Nant Whisky scandal – ABC
- Investing in Nant Whisky barrels seemed too good to be true - and it was – The Sydney Morning Herald
- Specialist Packaging Solutions
- Grandtully Distillery
- Whisky galore, but the liquid gold was a multimillion-pound con – Independent
- 'Liquid gold' whisky man is found guilty of fraud – The Telegraph
- Thousands were duped into buying casks of whisky at inflated prices – The Herald
- Whisky investment fraud charges - Harpers
- Cavendish / Hamilton Spirit Management Company
- Napier Spirit Company
- The Waldhaus Hotel Am See
- World's most expensive dram of Scotch was a fake - BBC
- Most expensive dram of Scotch ever sold is a fake – The drinks business
- Rare Scotch whisky at eight thousand pounds-a-dram is fake - Decanter