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Art Consignment and the Risk of Fraud

As headlines trumpet ever-higher auction prices, wealth managers analyze art as an investment asset class, and secured lenders consider ever more deals in which their collateral includes art, public and business attention focuses intently on the art world. Since many art transactions depend on the owner or seller of a work entrusting the artwork to another for sale, it is important to understand not only the nature of these transactions, but also the risks attendant upon them. While art consignment fraud can involve a dealer failing to pay the owner the proceeds from a sale, it can also arise from many other forms of fraudulent behavior: double-pledging, selling or transferring without authorization, even engaging in undisclosed sales commission arrangements.

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