SEC sues defunct wine company for fraudulently raising $8.5M through mostly elderly investors

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SEC sues for elderly investors overview: 

• Who: The U.S. Securities and Exchange Commission is suing Charles Winn LLC.
• Why: The SEC says the company fraudulently raised more than $8.5 million from elderly investors.
• Where: The lawsuit was filed in a California federal court.
• What are my options: Try Nat Geo Wines of the World for alternatives to Charles Winn LCC.

A wine company fraudulently raised more than $8.5 million from at least 121 mostly elderly investors, the U.S. Securities and Exchange Commission (SEC) alleges in a new lawsuit.

The SEC filed the lawsuit against Charles Winn LLC and some of its senior leaders on April 27 in a California federal court, alleging violations of the Securities Act and the Securities Exchange Act. The company is now defunct.

According to the lawsuit, the defendants lied to their alleged victims, who bought wine investments from them. They allegedly told them that their entire investment would go toward the purchase and storage of wine to be sold at a profit, with the company making a 10% commission. 

However, Charles Winn only put 43% of investor funds toward the purchase of wine, the SEC says. The defendants then used the rest to pay themselves or to pay workers, before eventually closing down, it adds.

“Defendants’ scheme has now collapsed, and the company has stopped responding to investors,” the SEC says.

Company has closed two of its bank accounts

The individual defendants are all believed to be residents of Great Britain, the SEC says.

The alleged scheme lasted from January 2018 and September 2021, with investors being told they could expect a rate of return between 10% and 45%. While investors were told sales representatives would only be paid once the wine was sold, they were in fact receiving an upfront commission of 5% to 15% from investor funds, the complaint states, 

The company also made minimal payments to investors, and misused investor funds by spending them on a variety of non-wine uses, including at least $1.7 million for payments to individuals, the lawsuit states.

Charles Winn closed two of its U.S. bank accounts in June 2020 and June 2021. As of October 2022, Charles Winn’s remaining account had a balance of $27, the SEC says.

The SEC is seeking disgorgement of any ill-gotten gains and an order blocking the defendants from further violations of federal securities laws.

In February, Activision Blizzard Inc. agreed to pay a $35 million fine to resolve claims by the SEC that the video game maker violated its whistleblower protection rules, among other things.

What do you think of the allegations against Charles Winn? Let us know in the comments! 

The SEC is represented in-house by Alyssa A. Qualls, Belinda I. Mathie and Donald W. Searles.

The Charles Winn case is Securities and Exchange Commission v. Charles Winn LLC et al., Case No. 2:23- cv-02988, in the U.S. District Court for the Central District of California. 

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