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Casks and Fraud

Fraud has persistently affected the Scotch whisky industry throughout its history, and continues to be an issue today. As we discuss in this article, within the past few decades, a number of whisky-cask scams have seduced badly-informed investors who failed to recognize the warning signs. 

This makes it all the more important to take extra care when buying a Scotch whisky cask – not simply to pick a tasty whisky but also to ensure actual ownership of the cask so that you have full autonomy over what happens to it after you buy it. 

So, first, how does UK law regard any fraud?  

The Fraud Act of 2006 clearly defines the crime and the manners in which it is committed:

• Fraud by false representation 

• Fraud by failure to disclose information when there is a legal duty to do so (Section 3)

• Fraud by abuse of position 

For clarity, it also explains:

• the defendant’s conduct must be dishonest

• the intention must be to make a gain; or cause a loss or the risk of a loss to another 

• No gain or loss needs actually to have been made

• The maximum sentence is 10 years’ imprisonment

The arguments below are examples of advice that have been presented by certain brokers, stockists or cask investment firms to convince prospective investors to commit their money, but may actually be considered as fraud by the law. 

Private purchasers need to be registered under the Warehousekeepers and Owners of Warehoused Goods Regulations 1999 (WOWGR) to receive a delivery order:

Certain sellers might misleadingly claim this as a reason to persuade potential investors to join a cask investment scheme, where the cask is not genuinely registered in the buyer’s name.

Private purchasers are not required to be registered under WOWGR unless they plan to become revenue traders, and so can theoretically receive a delivery order.

Someone/a company offers to act as a duty representative for a private individual:

Duty representatives may only be used by businesses based outside the UK.

A company that is not a distillery or warehousekeeper offers to sell a cask but does not explain that the cask is held in that company’s name, which means that purchasers have actually signed up for eventual profits made on that cask rather than ownership of the cask itself:

It is extremely important to understand the exact wording on any sales contract, especially when a delivery order (read more about delivery orders here) cannot be procured. If a delivery order is not provided for the purchase of a cask, the seller should be happy to confirm where the cask is stored and be able to provide contact details for that warehousekeeper.

Note the official guidance from the Scotch Whisky Association, the official trade organisation that represents the Scotch whisky industry: “Before completing the purchase you should check with the warehousekeeper what documents they require and ensure that the seller can deliver them to you”.

A company has sold a cask to a customer but misrepresented that cask’s current market value. Hence, the customer has paid more than a reasonably fair price:

Some casks of Scotch whisky offered by brokers, stockists and investment companies may be listed at prices that appear to be significantly above the perceived market value. However, the Scotch whisky cask market is highly volatile. So proving “fair price” in court would be challenging at best. For example, casks of Macallan were sold at massively inflated prices a few decades ago by scammers. But the value of those casks skyrocketed – thus, impossible legally to prove fraud. 

A cask company provides historic return rates using irrelevant data, such as the Knight Frank Rare Whisky Icon 100 Index, or promises potential return rates based on the value of casks – but the data is drawn from a limited or biased data set:

It is difficult to track the unpredictable Scotch whisky cask market. Be wary of any promises of annual returns (especially when “guaranteed”). At the moment, metrics that accurately track prices and sales within this industry are difficult to come by, with no publicly available “hard, transparent” data. 

“Hard, transparent data” refers to accessible records of Scotch whisky cask sales occurring among private investors, the prices of casks and how they were sold; whether sold at auctions, to other buyers, bottled and then sold through retailers, or via other methods. 

Some companies use or have used the Knight Frank Rare Whisky Icon 100 Index as a way to justify selling casks of Scotch whisky. This index tracks sales of bottles of specific whiskies, and is not analogous to the whisky cask market. 

The cost of a cask is presented with the potential number of bottles that could come from it, without explaining the significant extra costs involved in bottling:

If a cask company is pushing bottling the cask as a route to profit they should also explain the extra costs involved in addition to the price of the cask itself. Anecdotally, we have heard of many instances of sellers failing to calculate accurately the price per bottle, omitting additional costs such as bottling, duty, transportation and labelling that could impact the overall profitability of the investment.

Additionally, it is crucial to understand the naming rights belonging to a distillery if a cask is to be bottled: if a seller does not explain this clearly, it could constitute fraud. 

To clarify: many whisky brands may not allow casks to have the name of the distillery attached to a bottle or cask under certain conditions — and require the use of a pseudonym known to the industry (for example, ‘Kirkcowan’ is Bladnoch, ‘Williamson’ is Laphroaig and ‘Whitmore’ is Highland Park). It’s important to understand exactly how the whisky is allowed to be named and listed if it is to be sold on or auctioned, or labelled when bottled.

Casks are not actually stored under the WOWGR of a cask seller’s company but, rather, held by a “storage provider” who is a registered owner at the warehouse but not the warehousekeeper:

Not all Scotch whisky cask investment firms store their casks under their own WOWGR registration, instead using a third party storage provider. We’ve heard of one company that stores through a ‘provider’ not even listed with the UK’s Companies House, the government body that stores information on all the limited companies and limited liability partnerships registered in the UK. 

Such an arrangement makes it a virtual certainty that a purchaser will not actually ‘own’ a cask. If the situation becomes complicated — for example, the investment company folds or ceases communications with the purchaser – proving ownership of the cask to the warehouse where it’s stored will be very challenging.


The information provided on Protect Your Cask is intended solely for educational and informational purposes and does not constitute legal, financial, or investment advice. We strongly encourage readers to conduct their own research and, where necessary, consult with professional advisors or legal counsel before making any investment decisions in the Scotch whisky cask market. The views and opinions expressed herein are not intended to serve as a guarantee or prediction of future events and should not be relied upon as such. Protect Your Cask disclaims any liability for decisions made based on the information provided on this website.