Crime and Justice

Burlington wine maker sought investors, but didn’t have a liquor license

The state has ordered a cease-and-desist order against Zafa Wines LLC, a Burlington wine maker, for actively seeking investments while failing to disclose its lack of a proper liquor license.

The order was filed against owner Krista Scruggs, requiring that Scruggs immediately stop the selling or offering of securities in her company, said Michael Pieciak, commissioner of the Department of Financial Regulation.

Because Zafa was openly manufacturing, bottling, selling and distributing wine, a reasonable investor would have “justifiably assumed the company had all necessary state and federal liquor licenses to do so,” Pieciak said in a press release Monday.

But Zafa did not have those licenses, Pieciak said. 

However, the company informed prospective investors in a risk disclosure document that it did not expect compliance with government regulation to have a “material adverse effect” on its operating results.

By failing to disclose the company’s lack of multiple liquor licenses that are legally required to bottle, sell and distribute wine in Vermont and neighboring states, the state alleges that Scruggs broke the law.

The company made its first securities offering in September 2019. A year later, it had raised $300,000 — though it was eligible to raise as much as $750,000. However, legal documents show that a former Zafa employee had contacted the state in August 2020 with concerns about the company’s business practices, leading to the investigation that brought about the cease-and-desist order.

The employee contacted William Carrigan, deputy commissioner of the Department of Financial Regulation, and when he checked the Vermont Liquor Control website, he learned that Zafa’s application for a liquor license was pending, meaning the company was operating without licensure.

According to the cease-and-desist order, Zafa failed to provide, either to the department or to its investors, any data about its actual financial performance, rather than just projected performance, despite “numerous promises” to do so.

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In the order, the state alleged that Zafa’s continued operation without proper licensure created material “financial and other” risks that threaten to significantly impact the value of the securities sold to Vermont investors.

Zafa, founded in 2018, operates a farm and vineyard in Isle La Motte, though the brand is based out of a property on Pine Street in Burlington. 

On its website, the company touts its sustainability and equity work — primarily by using grapes and apples grown in Vermont, and by being a woman-owned business that intentionally maintains an 85% all-woman staff.

Scruggs did not respond Monday to request for comment.

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Ellie French

About Ellie

Ellie French is a general assignment reporter and news assistant for VTDigger. She is a recent graduate of Boston University, where she interned for the Boston Business Journal and served as the editor-in-chief of The Daily Free Press, BU’s student newspaper. She is originally from Duluth, Minnesota.

Email: [email protected]

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