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Fighting fakes: using technology to tackle wine fraud

It’s one thing understanding NFTs and the blockchain, but what are their practical applications for the wine world when it comes to one of its biggest challenges – the fight against fraud? Victoria Moore finds out

Words by Victoria Moore

wine graphic cheers
The Collection
(Illustration: Noma Bar)

‘The first principle we have at Google is not to add technology for technology’s sake; it needs to add value,’ says Alfonso De Gaetano, founder of Crurated. ‘I always took this with me.’ The Italian entrepreneur is talking to me from Dubai, where he looks after Google’s publishing business for all emerging markets. Next year, though, having already used a sabbatical to focus on the project, De Gaetano will leave Google to focus full time on his wine startup.

De Gaetano describes Crurated as ‘a platform where technology is at the core’. It was designed to refine the process of buying and selling fine wine while more closely connecting winemaker and collector. ‘Talking to top producers on regular trips to Burgundy, I felt a growing frustration at the way the distribution market is working. We connect producers, we add clients and we take a fee in the middle.’

The NFT and blockchain technology that De Gaetano employs to facilitate this has another important purpose: it creates an electronic trail of a wine’s ownership and movements, helping to combat counterfeiting and wine fraud.

The scale of the global problem with wine fraud was laid bare by the now notorious case of wine counterfeiter Rudy Kurniawan. It was 2014 when a New York jury found Kurniawan guilty of selling more than $1m of forged wine, but his story did not end with his sentence. Experts believe only a fraction of the Kurniawan wine was identified, meaning many of his counterfeit bottles are still in circulation. And of course, Kurniawan was never the only problem. The European Union Intellectual Property Office estimated that counterfeit wines and spirits were costing €2.7bn in sales across the EU. 

How are estates and châteaux attempting to tackle wine fraud themselves?

Over the past decade or so, the race to stay ahead of the swindlers has accelerated. Many top estates and châteaux invest heavily in counter wine fraud measures, which include labels that, like banknotes, grow ever more sophisticated, utilising watermarks, holograms and print that are only visible under UV light; laser etchings on the glass; and even hidden markers within the fabric of the bottle itself.

‘It keeps me on my toes,’ says Philip Moulin drily. Moulin heads up a dozen-strong team that authenticates wines for London merchant Berry Bros & Rudd – not a straightforward task given most estates prefer not to share details of the measures they are taking, lest doing so makes them easier to forge.

Philip Moulin holding wine bottle
Berry Bros & Rudd’s authentication expert Philip Moulin inspecting a bottle

Increasingly, non-digital markers of the type you might seek out with a magnifying glass or UV light are being layered with technological identifiers that can be scanned on a smartphone. These include RFID (radio-frequency identification) and NFC (near-field communication) tags that might be visibly built into a seal or covertly hidden under a label or capsule, scannable only by those who know where to look or happen upon them.

Château Lafite Rothschild is among those that use a tamper evident security seal containing a unique pattern of bubbles, frozen inside the polymer, that is broken if the seal is removed. The probability of replacing any given Bubble Tag pattern on a 1-sq-cm surface is just one in 1080, according to Prooftag, the manufacturer. It sounds hard to circumvent, though Moulin says he has seen people try. ‘Fraudsters will rely on the fact that people are lazy and don’t bother to scan the code. They’ll soak off the label of a lesser wine and apply one of a grand cru from the same domaine, instantly turning, say, an £800 case of Burgundy into one worth several thousand.’

Can blockchain technology help battle wine fraud?

Tech tags and one-of-a-kind QR codes can also be linked to an NFT (non-fungible token), effectively a digital twin of the bottle, whose identity and movements are then tracked on a blockchain network. The blockchain acts as an indelible ledger; and because the information is stored on a network, any alterations are visible. ‘The blockchain is used more for traceability than authenticity,’ says De Gaetano. ‘Today there are a lot of solutions for producers in terms of authenticity. But the problem you are trying to solve [with blockchain] is this: I go to an auction house, I buy a wine, I’ve no idea where that bottle comes from, maybe it’s authentic – but maybe it went around the world ten times before I buy it, and the wine is dead.’

At Crurated, almost all wines are bought direct from the domaine (some Bordeaux wines come from négociants), and an NFT is created for each bottle as it enters the warehouse. The idea is that ownership can be transferred on the blockchain and the wine can stay put, shipped only when its owner wants to drink it. A benefit of the new breed of platforms such as Crurated is that they make such technical solutions accessible to producers who might lack the might or inclination to create their own process.

Alfonso De Gaetano smiling
Alfonso De Gaetano is the founder of Crurated, which through NFT and blockchain technology, creates an electronic trail of a wine’s ownership and movements

Blockchain is also seen as a useful tool by some of those who come from the more traditional side of the wine business. Maureen Downey is a fine wine expert who spent several years working in US auction houses and, as one of the whistleblowers on the Kurniawan case, has worked closely with the FBI on a number of wine-fraud investigations. She runs Chai Consulting Authentication Services, through which clients can pay for a systematic examination of their wine. Bottles that pass the test can then be certified, with a blockchain record attached and Chai Vault ‘layering multiple identifications on top of blockchain security’.

To some, the notion of all fine wine – all wine, even – being linked to a publicly available record of ownership represents a kind of utopia of transparency. Others predict it could create ructions and stymie trade if producers could see how merchants circumvent allocations by buying additional cases from third parties. For the producer, one of the clear benefits of such new tech is the ability to communicate more with the collector. But there are issues around that weak part in the chain – the tie between the digital NFT and the actual bottle it represents.

Tom Gearing holding wine glass
Tom Gearing, CEO of Cult Wines, is concerned people could create wine NFTs without linking them to a physical bottle

‘One of my biggest concerns is that NFTs could be utilised by fraudsters as a way to get around actually having the physical asset,’ says Tom Gearing, CEO of Cult Wines, a fine wine portfolio-management company. Cult Wines is one of those that has adopted blockchain technology with a view to reducing the friction – and, says Gearing, the transactional fees – involved in buying and selling. It is about to launch a trading platform, Cult X, and is in the process of applying tamper-proof stickers to the bottles and NFC chips to all the bottles or cases of all the wine in its warehouse. Gearing warns that, ‘Right now, there is nothing stopping someone who seems to be reputable going and creating a wine NFT. And they can say it is connected to a physical bottle of wine in a warehouse – but if you don’t ever ask for the wine to be delivered, how do you know it exists? The consumer should still be thinking about the same things they think about when they buy a wine from a merchant: Who are they? Are they reliable? Have they been around a long time? Do I know that their warehouse exists?’

The race to stay ahead of the swindlers has accelerated. Many top estates and châteaux invest heavily in counter-fraud measures

Verifying wine by scanning the liquid in the bottle

If you have a physical bottle of wine in your hands, there is general agreement that, provided you bother to scan the QR code or tap your phone on the tag, these measures do ease the authentication process. But is it possible to go one step further? This web of authentication is tied entirely to the wrapper and not to the wine itself. What if you could, for example, take a machine the size of a shoebox, shine a laser beam through a still sealed bottle of wine, use that light to take a digital fingerprint of the wine itself and then compare that fingerprint to a virtual reference that would be able to make a judgment, on a balance of probabilities, as to whether or not wine fraud had occurred? VeriVin is a tech startup, founded by Dr Cecilia Muldoon – a physics graduate, classic car aficionado and specialist in quantum computing – that aims to do just that. 

‘It’s not a magic box that can tell you something’s 47% Pinot Noir, 30% Cabernet Sauvignon, or whatever,’ says Dan Thomas, VeriVin’s commercial director. So, how accurate is it? ‘We’re talking about balance of probabilities rather than absolutes. [We’re] getting close to 100% true positive, true negative – we’ve got almost nothing in the false positive, false negative space.’ This claim bears some unpacking. VeriVin, as Thomas points out, is ‘all about comparative technique’. If you have a wine that is heat-damaged, oxidised, corked or whatever, its molecular structure will have changed, and it will throw a different readout from, say, an undamaged bottle in a château cellar. How many collectors would be happy to find that two or maybe more bottles in a case suddenly became unsellable because cork taint or heat damage meant they gave the ‘wrong’ readout when tested on VeriVin?

person scanning wine with phone
The European Union Intellectual Property Office estimated that counterfeit wines and spirits were costing €2.7bn in sales across the EU

The changing nature of wine means that, as bottles mature, the reference fingerprint will also need to update. In a real world situation, Thomas says, he expects VeriVin to be able to take in data from those scanning authenticated bottles at transaction time and ‘build a consolidated picture’ to create new comparators. Of course, this also means gearing the system to protect it from wine fraudsters attempting to deliberately feed in misleading data with a view to then achieving ‘authentication’ of a job lot of faked wine. VeriVin still has some technical issues to solve – Thomas doesn’t want to say what they are – before it can be made commercially available. But ‘as far as I know,’ he says, ‘we’re the only ones going beyond the glass.’

The deeper you dig into authentication systems, the more questions are raised about how and in what our knowledge is vested. These checks are, says Thomas, ‘layers of an onion’. And he is right: absolute certainty – about anything – is impossible. No system can remove the need for human common sense and questioning. But they can all help.