The San Francisco-based company, Underground Cellar, has the potential to fulfill the dreams of wine enthusiasts. Its “temperature-controlled CloudCellar” in Napa Valley offers free storage for up to 500 bottles of wine, which can be shipped for free at any time. What’s more exciting is that the company collaborates with wineries to provide exclusive wine bottle upgrades. During weekly offers, members can purchase a $25 Cabernet and get the opportunity to upgrade to a similar wine worth $500.
Despite its initial popularity, Underground Cellar has faced a backlash from its customers lately. The San Francisco Chronicle reported that in late April, the company suddenly stopped its operations and filed for Chapter 7 bankruptcy. It has a debt of approximately $25 million, including unpaid wine and other obligations, and some of its former customers are skeptical about the existence of the CloudCellar.
Erik Jensen filed a lawsuit against Underground Cellar just three days before the company filed for bankruptcy. In his lawsuit, he accused the company of fraud and claimed that he has around $3,000 worth of wine that he cannot retrieve.
Underground Cellar’s bankruptcy filing indicates that customers placed orders worth $2.7 million for wine that never reached the warehouse. Despite the reasons mentioned on its website, such as market headwinds and inability to secure financing in a challenging capital market, the exact cause of the company’s failure remains unclear.
In a Reddit thread discussing the shutdown of Underground Cellar, one user expressed frustration by stating, “I have over $3k worth of wine in their cellar. What a scam. How can this be legal? I’ve tried calling and emailing and haven’t heard anything.”
Despite reporting more than $20 million in revenue last year, Underground Cellar now has only $100,000 in cash and $328,000 in invoices owed, according to bankruptcy documents, per The San Francisco Chronicle. Additionally, the company lists physical assets worth less than $35,000.
Bradley Coppella, who claimed to have spent over $15,000 on wine with Underground Cellar, expressed his skepticism by stating to the outlet, “It’s ridiculous that this company is claiming that’s all they have in assets.”