U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 25699 / April 20, 2023
Securities and Exchange Commission v. Charles Winn LLC, Civil Action No. 23-cv-02988 (C.D. Cal., filed April 20, 2023)
SEC Files Charges in Fine Wine Investment Fraud Scheme
The Securities and Exchange Commission filed fraud charges today against Charles Winn LLC, its senior managers, Aaron David Scott-Britten (aka Aaron David, Aaron Scott, and Aaron David K. Britten) and Ohran Emmanuel Stewart (aka Elliott Stewart), Casey Alexander, a senior sales representative of Charles Winn, and Charles Winn's record managing member, Charlie Jake Smith, for allegedly raising at least $8.5 million through the fraudulent and unregistered offer and sale of purported fine wine investments to at least 121 investors, many of whom are elderly.
According to the SEC's complaint, between January 2018 and September 2021, Charles Winn, through Scott-Britten, Stewart, and Alexander, its sales representatives, and marketing materials, represented to investors that Charles Winn would buy investment-grade wines for the investors, later sell the wine at a profit, and would share in a portion of the profits with investors. As alleged in the complaint, using sales scripts provided by Scott-Britten and Stewart, Charles Winn's sales representatives, including Alexander, falsely represented to investors that their money would solely be used to purchase and store wine, the wine could be expected to achieve a return ranging between 10% to 45%, and the company would not receive any compensation or profit until the wine was sold. The complaint further alleges that these statements were false because Charles Winn, through Scott-Britten, Stewart, and Smith, used no more than 43% of the investors' money for the purchase and storage of wine, 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, including up-front commissions to Charles Winn sales representatives, payments to back office staff, and payments to Scott-Britten, Stewart, and their family members or affiliated entities, and Smith. As alleged in the complaint, Scott-Britten and Stewart orchestrated the fraudulent scheme, and Alexander and Smith participated in it.
The SEC's complaint, filed in the Central District of California, alleges that Charles Winn, Scott-Britten, Stewart, and Alexander violated Sections 5(a), 5(c), and 17(a) of the Securities Act of 1933, and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, that Alexander also violated Section 15(a)(1) of the Exchange Act, and that Smith violated Sections 5(a), 5(c), 17(a)(2), and 17(a)(3) of the Securities Act. The complaint also charges Scott-Britten and Stewart as control persons under Section 20(a) of the Exchange Act. It also seeks injunctive relief, disgorgement plus prejudgment interest, and civil penalties from Charles Winn, Scott-Britten, Stewart, Alexander and Smith, and a prohibition on Scott-Britten and Stewart serving as the officer or director of a public company.
The SEC's investigation has been conducted by BeLinda Mathie and Pesach Glaser and supervised by Steven Klawans of the SEC's Chicago Regional Office. The SEC's litigation will be led by Alyssa Qualls. The SEC appreciates the assistance of the Iowa Insurance Division, Securities and Regulated Industries Bureau; the Texas State Securities Board; and the Washington Department of Financial Institutions, Securities Bureau.