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The Epstein Files and the Hidden Economy of Art-Backed Billionaire Loans · The Epstein Chronicles

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  Speaker 1: What's up, everyone, and welcome to another episode of the
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  Epstein Chronicles. If there's one thing that the rich and
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  the affluent are good at, it's hiding their money. And
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  one of the most effective ways of doing that is
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  to invest in high end art. And that's why you
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  see people like Leon Black with literally billion dollar art collections,
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  because this is a man who doesn't want to pay taxes, right,
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  And look, I'm not knocking them for that. Who the
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  hell wants to pay taxes? But every year we do,
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  and then you have people like Leon Black, Jeffrey Epstein,
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  and the Epstein class, and they find all kinds of
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  creative ways to make sure they're not paying any money
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  out of their pocket. Ever when it comes to taxes,
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  and this is exactly what Leon Black was paying Jeffrey
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  Epstein for this kind of tax advice. I mean, did
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  you really think you was paying one hundred and fifty
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  million dollars for actual tax advice? That would be a
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  bit extreme. No, seems like quite the bill for basic
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  tax advice. I would think that a guy like Leon
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  Black with so much money would be a bit more frugal,
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  but I guess not. I guess he just wants to
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  blow a bunch of dough on tax advice from a
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  guy that's not qualified to give it, but sure keep
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  feeding us that ridiculous narrative. Today's article is from CNBC
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  and the headline Epstein Files highlight how wealthy borrow against
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  art collections. This article was authored by Robert Frank. So
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  what happens is they just leverage themselves and borrow, borrow, borrow, borrow,
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  and they never have to even pay it all back.
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  They just keep the griff going forever. And that's how
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  these rich people roll. Meanwhile, the rest of us are
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  getting blasted with what I call the poor people's tax,
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  and what I mean by that is all the extra
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  fees you end up paying if you're poor, God forbid
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  you have bad credit. Meanwhile, you have guys like Leon
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  Black who are making literally billions of dollars and hardly
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  paying anything in taxes. A four hundred and eighty four
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  million dollar art loan secured by a billionaire Leon Black,
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  and disclosed in the latest Epstein Files highlights one of
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  the fastest growing and most lucrative corners of the art world.
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  And this is something that not only people like Leon
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  Black or Jeffrey Epstein were up to. We're talking about
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  people like cartel bosses, international criminal organizations, and of course oligarchs.
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  And I don't just me and Russian ones. I'm talking
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  about all of them. I mean, how many big mouths
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  who ran around talking about corruption and this that the
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  other thing ended up being in like the Paradise papers,
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  that exposed a whole bunch of these people for the
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  scoundrels they are. But of course nothing ever came of it, right,
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  nobody want to prison. Financial sector never really affected, just
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  business as usual. To a March twenty fifteen document released
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  as part of the Epstein files, Black secured the loan
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  from Bank of America backed by works of art. While
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  not unusual for top private banking clients, the loan made
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  headlines for its size and exotic collateral, which included blue
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  chip works by Picasso, Geocommetee, Tition, Matisse, and others. Art lending, however,
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  has become an increasingly valuable tool for both wealthy collectors
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  and wealth management firms vuying to manage their fortunes. The
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  global market for art loans is estimated at between thirty
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  eight billion and forty five billion today, According to a
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  report from the art tactic. The market is expected to
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  top fifty billion by twenty twenty eight, growing at about
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  twelve percent a year, and I expect that to continue
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  to just blow up considering how many of these people
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  are looking for places to stash their money, and without
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  volatile tile, a lot of different areas are you can
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  avoid a lot of that volatility by investing in something
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  like high end art because it really doesn't lose its
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  value right. In fact, it continues to increase and all
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  these people know it, so they're able to borrow by
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  using this sort of art as collateral. But the problem
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  is a lot of times they're borrowing off of money
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  that they never even pay taxes on. And I think
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  a pretty good example of how this all plays out
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  is in the show Billions. There's a part where Bobby
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  Axelrod has all this different art and he is trying
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  to hide the art from people trying to come get it,
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  and I think it illustrates how these high end people
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  will use the art market to try and hide their money.
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  And I think, besides real estate, I think that the
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  art market is an area that is being heavily used
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  by these oligarchs. And I think there is plenty evidence
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  to back that up. I mean, we know that Leon
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  Black for sure was utilizing the art market, and when
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  you start putting the pieces together, it's pretty obvious what
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  he was doing. Now, look, it's one thing to know something,
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  it's another thing to be able to prove it. And
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  considering how little they care about actually following the money here,
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  I highly doubt we're ever going to get to the
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  bottom of any of it when it comes to Leon Black.
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  I mean, just look at what's going on in Congress.
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  They were requested to speak with Leon Black. I mean,
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  what why not just hit them with a subpoena and
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  force them to come in like everybody else, But instead
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  he gets a cordial invite. Why is that? Why isn't
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  Leon Black being treated like any other possible criminal. Adam Chin,
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  managing partner of International Art Finance and longtime art finance expert,
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  said art loans are away for collectors to pull cash
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  from paintings that they can also continue to enjoy on
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  their walls. Oh yeah, you see this painting over here.
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  I drew a five billion dollar loan off it. I mean,
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  imagine having that kind of collateral hanging on your wall.
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  Most people have to go in, you know, give their
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  title up to get some money on it. Hey, let
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  me get you know, five grand on my title and
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  I'll pay it back. And if I can't pay it back,
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  well you've got to take my car now. I can't
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  go to work, can't live my life, et cetera. But
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  this is all the hustle right here right. They know
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  these people are never gonna default. They'll gladly give these
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  loans out, just another way to lounder money. It's the
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  best of both worlds. Jin said. You can monetize an
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  otherwise non income producing asset and it's still great to
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  look at. Well awesome, I'm glad. I'm glad. All of
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  you stiff upper lip types are enjoying yourselves down here
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  on the bottom rung. Not very much fun. Far from
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  signaling a lack of funds. Art loans are typically used
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  by the wealthy to provide ready cash leverage financial investments
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  and avoid hefty tax bills. Oh well, what do you know?
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  Shocking huh? And really, as much as I despise it,
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  we need to look directly at Congress and ask them
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  what they're doing. They allow all this, they write the laws.
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  All these people are just utilizing the loopholes that already exist.
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  So if Congress cared, they'd write better laws. Private banks
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  often grant art loans to top clients at low interest rates,
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  knowing the client as hundreds of millions or even billions
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  in other assets in case the loan's default. The interest
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  rate on Black's loan in twenty fifteen was one point
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  four to three percent, according to the document, one point
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  four to three percent. How many of you out there
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  are getting that rate? I'll wait, not very many of you. Now.
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  I'm sure some of you might be, and that's great,
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  I'm happy for you, but I'm certainly not getting one
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  point four to three percent. You go out and buy
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  a used car right now, and you get it from
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  like a credit union or whatever, and you're still gonna
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  end up paying like seven point nine to nine percent
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  on your loan right around there, even with good credit. Now,
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  obviously it varies and it bounces around, but for the
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  most part, that's right around what you're looking at. Meanwhile,
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  you have guys like Leon Black score on a one
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  point four to three percent rate, and you wonder why
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  we all stay poor and they continue to get rich.
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  The bulk of the art lending market is dominated by
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  the auction houses, especially Southeast Financial Services, as well as
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  specialty lenders like International Art Finance. Scott Millicon, global head
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  of lending at Southeast Financial Service, said collectors use the
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  proceeds for a wide variety of purposes. The company now
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  lends against classic cars as well as art lend against anything.
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  If you have some collateral and you're looking to, you know,
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  get a loan, you can find somebody that will probably
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  lend you the money. What it comes down to is
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  the interest rate. That's the most important part, right, what
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  the hell's the big and how long is it running?
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  Because that's how you get smashed. It's not the actual
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  loan itself. For the most part, the loan is usually
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  you know, doable, right, manageable. It's the excessive fees that
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  get tacked onto it, this tax that tax finance charges
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  and before you know it, you're looking at six dimes
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  more than you thought the car was going to be.
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  But of course, guys like Leon Black they don't have
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  those worries, and they have vehicles and this art and
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  everything serves a purpose, and for Leon Black, that purpose
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  is to avoid taxes. That was the whole entire scam,
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  the whole plot, the whole entire reason that he was
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  getting advice quote unquote from Jeffrey Epstein. Many of our
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  clients borrow against their fine art collections to invest in businesses,
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  pursue new art acquisitions, or release cash without selling works
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  they love, Millicon said. Chinn said. Many of today's collectors
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  are top leaders in private equity and hedge funds. I
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  bet they are. What did I just tell you? But
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  I'm sure all of them are planned by the rules right.
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  Since they're used to using leverage to turbocharge their wealth
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  in their investments in businesses, they view leveraging their art
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  collection as a natural extension. Chin estimates that the total
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  value of art held in private hands is between one
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  trillion and two trillion dollars, with art loans representing a
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  tiny fraction of the total, well under fifty billion. He said,
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  the industry has plenty of room to grow one trillion
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  and two trillion. How much of that wealth do you
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  have hanging on your walls? I can tell you right now,
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  I have zero. Fuck. I don't even have a knockoff
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  antl atoms on my wall. Art is the most underleveraged
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  data set on the planet, he said. Art loans also
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  generate lucrative tax benefits. Selling a work of art triggers
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  a capital gains rate of twenty eight percent, a higher
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  rate for collectibles than other categories, along with the three
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  point eight net investment income tax, bringing the top rate
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  to thirty one point eight percent. Selling in certain states
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  also trigger stay taxes. Well it should. An art loan,
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  even at today's elevated lending rates typically is around eight
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  percent to nine percent. It's still far more efficient than
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  paying a tax. Plus, borrowers can usually keep the art
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  on their walls. That's what this is all about. Taxes. Okay,
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  ignore everything else and understand this is about them hiding money.
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  That's it. That's the whole story. The art lending business
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  has also benefited from a twenty seventeen tax change that
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  eliminated the use of soul called ten thirty one exchanges
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  in the art market. The practice allowed art collectors to
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  avoid capital gains taxes by swapping one work for another
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  without the benefit. Many art collectors turned the loans to
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  provide liquidity without the tax penalties. Always a loophole, always
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  a technicality, and that's on Congress, not on the people
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  that are utilizing these loopholes and technicalities. Congress should do better.
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  They should know that they're screwing up. Or is it
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  that they do know and they're leaving these loopholes in
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  there because the people that are benefiting are the same
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  people that are donating to them to get them elected.
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  I'll leave it up to you to decide. Chinn said
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  that given the art market's recent rebound and following interest rates,
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  art lending is poised to continue its strong growth. The
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  art market is a strange market, he said, but if
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  you look at every other asset class event, it gets fractionalized, securitized,
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  and leveraged. It's the nature of the universe. Well, it
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  should be highly regulated. Has there ever been a market
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  that needs regulation more than the high end art market? So, folks, look,
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  this just goes right on top of what we've talked
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  about previously about the high end art market and about
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  how it's utilized as a tax haven for people like
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  Leon Black. And it's been my opinion from the very
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  beginning when we first learned about Leon Black and his
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  relationship with Epstein, that Jeffrey Epstein wasn't giving him tax advice,
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  not in the traditional sense, but instead was helping him
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  hide that money. And I think as these receipts continue
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  to come out, I think that becomes more clear by
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  the day. So like usual, we'll keep on top of it,
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  and when we have some more information to share, we
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  most certainly will. All the information that goes with this
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  episode can be found in the description Fox