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Avoiding the Fraud of Collectibles Investing

Last update on: Feb 02 2017

I’ve always believed that collectibles aren’t investments. Collectibles are items such as wine, art, antiques, cars, and the like. Periodically there are news reports that a particular collectible is a great investment because it has appreciated so much in recent years. There’s considerably less publicity when the price of that collectible declines are flattens out.

Here’s a good example of why collectibles are a difficult place to put your money. It describes major wine frauds. The frauds were perpetrated on some of the wealthiest Americans. These people with all the resources available bought millions of dollars of counterfeit wine. So, the rest of us don’t have much of a chance of succeeding. If you like some type of collectible, go ahead and collect it. But you need to know what you’re doing, especially how to tell the real thing from a fake. You also should do it for the pleasure, not for profit.

Egan soon began pulling suspect wines from Frye’s collection and breaking them down by component parts. Some of the labels, he realized, were photocopies that had been distressed–as he puts it, “scuffed in a weird way you wouldn’t see in normal cellaring.” Though the photocopies were expertly done, under his jeweler’s loupe the letters were revealed as pixilated, as from a laser printer. By the time he was done, Egan had identified 30 very expensive fake wines in Frye’s collection.

There are no even vaguely reliable numbers compiled on the value of bogus fine and rare wines that change hands every year (as opposed to the industrial-scale counterfeit bottling of more commonplace wines said to take place in the Far East). Egan’s ballpark estimate is around $100 million. But most of them go undetected, or unprosecuted, partly because, as Russell Frye discovered, “it takes very deep pockets to pursue someone who is selling fake products.” (For that reason Frye ended up settling out of court with the vendor who sold him the ersatz bottles.)

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