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Like many other forms of business where there's money to be made, the whisky industry attracts all sorts of opportunists. In the past twenty years or so, some whiskies have gained a high collectability and exchange value and, for the first time in history, are bought in high numbers by non-drinkers as an investment. For whisky lovers, this has manifested in price increases with diminishing opportunities to afford flavour experimentation.
The idea of whisky scams has peaked in recent years. Multiple reports of selling non-existent barrels, bottles, and manufactured fakes have become an unsettling trend that exploits the desires of drinkers, investors, collectors, and 'hoarders' alike. With a growing industry worth close to £70 bn, companies are spewing money to conquer new territories, build distilleries, widen their range with new expressions, and test the limits of the concept of whisky. Scammers have taken notice of people's willingness to spend money on alcohol unlike ever before and want their piece of the cake.
Some might think that whisky scams are a new thing, but in reality, it's just another (though higher) wave that has been made possible by the World Wide Web. In this case, the Nigerian prince has managed to get a hold of barrels of 1950s Macallan and cases of Pappy at a 'very good price'.
So, how do you avoid being scammed? In this article, we will provide you with some reminders before investing and also look into some of the high-profile cases of known whisky scams.
Let's go.
A Look Back in Time
'The Whisky Par Excellence'
We would like to start with a little story about 2 brothers that almost brought down the whole whisky industry. So, no biggie.
In the 1880s, brothers Robert and Walter Pattison decided to change their dairy wholesale careers to blending whiskies. Whisky blending became highly popular in the mid-1800s when the concept of drinking single malts was unfashionable. With the help of their father, Walter Sr., Robert and Walter founded Elder & Co. in 1882, followed by the launch of blended brands, including Morning Dew and Royal Gordon, five years later. By 1889, the company made a significant profit and entered the Stock Exchange.
Image by Scotsman Food and Drink
The Pattison brothers became famous due to their flamboyant and expensive marketing methods that took advantage of the British Military and even gave away parrots trained to repeat marketing phrases to publicans. By 1896, the company changed its name to Pattisons Ltd and bought significant stocks in Glenfarclas, Oban, Aultmore, and Ardgowan distilleries. But in the next couple of years, the brothers would face charges of fraud and embezzlement. Why?
It turned out that the Pattisons had not only over-valued the company's possessions to inflate its worth but sold cheap, low-quality whiskies at a higher price while running on borrowed money. When the company was investigated, it was discovered that around £500,000 (~£83 146 639 in today's money) was missing from its reported market value assets. Both brothers were sentenced to serve time for their crimes.
Image by Historyworld
Even though the Pattisons became notorious for their 'whisky business skills', they weren't the only ones defrauding people of their money. Multiple other companies also failed at the time due to overproduction and the public's growing distrust of whisky quality (rightfully so). The event is sometimes referred to as The Pattison Crash, and due to the high-profile lifestyle the brothers created, they are often blamed for almost destroying the whisky industry at the time. What followed was new regulations to define what can be called whisky. In 1915, the 3-year minimum was implemented to tackle whisky alterations, which had become common during the Victorian era.
The Prohibition & Illicit Distilling
People will always find a way to get drunk. Distilling has been around for more than 500 years with the first records dating back to 1405 in Ireland and 1494 in Scotland. Alongside legal distilling, there has always been illicit distilling. Unfortunately, the trend becomes more popular in times of high taxes and tight government control. One of the best examples happened between 1920 and 1933 in the United States.
Image by The US Archive
The US prohibition, AKA the 18th Amendment, AKA the Volstead Act, came into effect on the 1st of July 1920. The new law banned the manufacture, transportation, and sale of intoxicating liquors, pushing alcohol consumption underground.
Not only did people drink in secret, but some even sourced to illicit distilling. Due to the lack of government quality control and the public's desire to get their kicks, toxic spirits have entered the market. It was impossible to know where the alcohol originated from without identifiable labelling and quality insurance.
A new type of criminal was also created - a booze-smuggling gangster. In its simplicity, the gangster deployed the Pattison Method of selling cheap whiskies at a high price - minus the taxes. Barkeepers were also adapting the Victorian Way of altering the spirits for higher profits, but this time, people didn't care as long as they got their kicks, risking their lives on the way.
Image by Brownstone Institute
Of course, there was one way to get a hold of government-controlled alcohol - getting a prescription from your doctor. Six distilleries in America were granted licenses to distil alcohol for 'medicinal purposes, ' providing doctors with a nice way to make some additional income. An alcohol prescription cost $3 (~$50 today) with the addition of another $3-4 to fill them. Anyone who had the money would be granted one.
In conclusion, US prohibition was the golden goose period for opportunists and allowed blatant ways for them to charge more money for less. Not to mention the uncollected taxes the US government missed out on.
Whisky Scams of Today
The internet and its worldwide reach have made scams a lot easier today. Multiple unruly companies have been erected to meet the high demand for limited-release and hard-to-come-by whiskies.
1990s Fakes
In the mid-1990s, multiple rare and old bottles appeared at whisky auctions. Somehow, whiskies from closed Campbeltown distilleries and old Macallan's from the late 1800s in great condition started to flood in. A panel of whisky experts, including Dave Broom and Dr Nick Morgan, raised their scepticism on the authenticity of the bottles made available due to their high numbers and rarity. With closer examination, many of these 'old' bottlings had obvious labelling mistakes that didn't match the historical timeline.
Image by Bonhams - The Macallan Replica Series
At the same time, Macallan distillery was combing through auctions to buy back 100 antique bottles to be used as a reference for their new collection - 'Replica'. By December 2001, Macallan was notified of the high possibility of the fakes. As it turned out, using modern investigation methods, it was discovered that the liquid inside and the labels of the antique bottles were fake. This didn't stop Macallan from releasing 4 different Replica editions that were based on imagined flavour profiles and aesthetics (the liquid from the fakes was dated to be from the post-1950s). The collection was eventually also deemed authentic, despite all the commotion surrounding it - after all, the bottles sold as Replicas contained whisky from the Macallan distillery.
Another Fake Macallan
Macallan has become one of collectors and high-class customers' most sought-after Scottish whiskies. In 2017, 2cl glass of 1878 Macallan was sold in The Hotel Waldhaus am See in St Moritz, Switzerland, for £8,200 ($10,000). After suspicions were raised about its authenticity, the liquid was examined and found to be a Scottish blended whisky distilled between 1970 and 1972.
Image by scotchwhisky.com
The discovery led to speculations on when the bottle was produced by the scammers. Could it be one of the fakes not caught in the early 2000s that hit the market in the 1990s?
One thing is for sure - Macallan fakes are still out there, and unfortunately, more are most likely produced as we speak.
Fake Whisky Setup of 2017
In early 2017, a fake whisky operation was discovered in Finchley, London, England. A London-based auction site whisky.auction got suspicious of the number of rare old bottles offered to the auction by a single person over time. After the examination of the bottles by in-house experts, most of them turned out to be sophisticated fakes. The auction house managed to arrange a visit to the premises located in a residential area and quickly determined that something was off. The house was loaded with multiple rare bottles of singular expressions and a bottling and labelling facility.
The Metropolitan police were notified, and the location was raided. How many bottles were manufactured at the facility and sent and sold to different auction houses is still unclear.
Most auction houses have a policy and checks to prevent fake bottlings from entering their auctions. But let's face it: the fakers are upping their game, making the fakes harder to detect.
The Nant Distillery Fiasco
The Australian Nant distillery began operation in 2008 in Hobart, Tasmania. With the help of his lawyer, the founder/owner of the distillery, Keith Batt, secured investments from almost 900 people around the world. The investors were offered a chance to purchase barrels for up to $14 000 AUD (£8,000) that the distillery would buy back within 4 years with interest. The investments would be used to operate the distillery until it became profitable. Unfortunately for many, they never saw their money again.
Image by Courier Mail - Keith Batt
It turned out that the distillery had sold close to 700 barrels that didn't exist, were never filled, or mysteriously went missing. When the premise was audited in early 2017 by an interested buyer, the 'creative business model' of the Nant distillery came to light. In the end, the investors were frauded millions of pounds while Mr Batt spent his time in his $1.4 million home in Brisbane with a riverside view.
Keith Batt was forced to file for personal bankruptcy with around $16 million in depth. According to interviews given by Mr. Batt after the scandal, he continues to blame his lawyer, the investors, business partners, and advisers.
Social Media Scams
The scammers have extended their field to social media sites, including Twitter and Facebook. Google is also loaded with adverts to invest in whisky casks, promising high profits. Unfortunately, some sellers are up to no good.
Collecting whisky and 'flipping' bottles for profit has become popular among non-whisky drinkers. The desire to make a quick buck hasn't gone unnoticed by scammers, who are well aware that people with no previous experience or expertise in whisky are looking to invest.
Twitter seems to be a breeding ground for scammers posing pictures of Pappy Van Winkle, Weller, and the Buffalo Trace Antiques Collection. Since these bottlings are in extremely high demand due to their small production sizes, whiskey enthusiasts hoard every bottle they can get their hands on. Thankfully, some Twitter users have made it their job to try to take down the resilient whiskey scammers, forcing many of them to close their accounts (although trying to create new ones to continue their operations).
Here is a small checklist to consider before making any purchases on social media:
Do I know this person? If not, can I trust them?
Are they asking you to contact them mainly with private messaging?
Is there a verifiable website, an email, or a business address?
Have they taken the picture themselves?
Do they have a return policy?
What exactly are you paying for?
Research how much you should be expected to pay for it.
Is the price hidden from the public and easily negotiable?
Does the deal seem too good to be true? If yes, then it usually is.
Are they rushing you to buy?
Have they blocked you for asking too many questions?
If there is any doubt, just stay out!
We also wanted to include a link in this article to the Whisky Interest Direct that offers advice on spotting fake barrels up for scrabs.
Always buy your whisky from trusted retailers, distilleries and barrel brokers to stay safe. And it doesn't hurt to ask where they source their whisky from.
Thank you for reading! Please leave a thought in the comments section below, or follow us on social media with #whiskyardvark for updates.
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