‘Cloud-Based’ Wine Reseller Facing Bankruptcy Accused of Millions in Fraud

A California-based wine reseller that advertised itself as a bank is facing tens of millions in debt and millions more in alleged customer fraud. (Photo: Bernd Wei’brod/picture-alliance/dpa/AP Images)

A San Francisco start-up that promised to revolutionize the wine industry has filed for Chapter 7 bankruptcy, citing $25 million in debt and up to $2.7 million in “inventory discrepancy” that was promised to tens of thousands of customers.

“It’s just horrifying. Everybody is feeling robbed,” Gregg Thatcher, a customer owed over $1,000 in wine, told the SF Chronicle. “People built up these vast collections and they don’t know what they’re going to do. It’s a tremendous loss for them.”

The controversy revolves around Underground Cellar and its so-called “CloudCellar” service. There, users could freely store and ship up to 500 bottles of wine in a climate-controlled facility.

A major selling point of the CloudCellar was its ambiguously described Upgrade service, which promised to randomly trade out your wine reserves for new bottles that could theoretically double or quadruple your investment.

“Free Upgrade” system touted on the Underground Cellar site. (Photo: Undergroundcellar.com)

Clearly, Underground Cellar’s business model focused more on the speculative value of bottles than the wine itself. Now, many customers suspect that those “investments” may never have existed to begin with.

According to its bankruptcy filing, Underground Cellar owes 37,000 unsecured claims worth of wine to customers. Of its estimated $11 million wine inventory, an additional $2.7 million is supposedly unaccounted for.

As it stands right now, no one with wine in the CloudCellar is allowed to withdraw their assets. A private Underground Cellar Customers Group Facebook page currently lists over 90,000 members — one user claims to claims to have spent over $200,000.

Following the much-publicized collapse of Silicon Valley Bank and the FTX crypto exchange over the past few months, it appears that investment bubbles are being popped left and right in industries of all kinds.

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