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Wine Reseller Underground Cellar Faces Alleged Fraud and $25 Million Debt Amid Bankruptcy

Wine reseller Underground Cellar is facing controversy amid its recent filing for bankruptcy.

The San Francisco start-up, founded by Jeffrey Shaw in 2013, filed for Chapter 7 bankruptcy in the District of Delaware on May 1, according to the San Francisco Chronicle. The bankruptcy filings state that the company owes over $25 million dollars in debt and 37,000 unsecured claims — mostly for wine that customers apparently never received.

A majority of these claims have to do with the company’s “CloudCellar” service, which allowed customers to purchase wine bottles and have them stored in Underground Cellar’s climate-controlled facility until they chose to receive them. Now, many of these customers allegedly cannot access the wine they purchased, with some claiming that they are “feeling robbed.”

“People built up these vast collections and they don’t know what they’re going to do. It’s a tremendous loss for them,” Gregg Thatcher, a customer owed some $1,000 in merchandise, tells the Chronicle. Other Underground Cellar clients spent upwards of $3,000 on wine that never arrived.

In a statement on its website, the brand cites market changes as reason for its late April shutdown.

“The decision to file for bankruptcy was not an easy one, but it became necessary due to recent market headwinds, and an inability to secure follow-on financing or an acquisition in what has become an increasingly challenging capital market,” the company says.

Frustration appears to be building among customers, especially within the Underground Cellar Customers Facebook group, which currently has over 90,000 members. The group’s administrators say that they intend to help organize customers for legal action.

Underground Cellar reports an estimated $11 million in wine inventory and $25 million in unsecured claims. The filing also lists an inventory discrepancy of $2.7 million in online orders that apparently never arrived at Underground Cellar’s warehouse.

Reportedly, some customers doubt that the sold inventory even existed at all.

The article Wine Reseller Underground Cellar Faces Alleged Fraud and $25 Million Debt Amid Bankruptcy appeared first on VinePair.

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