The Tamesis
Maddox Gallery, which has galleries in London and Dubai, has been accused of inflating the value of art used as collateral for loans. Luxury Asset Capital (LAC), a lender that provides high-value asset-backed loans, made the claim against the gallery, according to a civil lawsuit filed last August in the U.S. District Court for the Southern District of New York.
According to the complaint, LAC alleges that Maddox knowingly provided false “good faith estimates” of the secondary market value of artworks by Duncan McCormick and Albert Willem in order to induce LAC to accept the works as alternative collateral in exchange for a valuable George Condo painting.
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The dispute dates back to July 2022, when LAC made several loans to an art dealer named Seth Carmichael and accepted as collateral a collection of blue-chip artworks by artists including Condo, Rashid Johnson and Robert Nava. After Carmichael defaulted on the loan, Maddox contacted LAC, claiming that it had previously purchased some of the same works from Carmichael but had never owned them. According to the complaint, LAC’s attorneys told Maddox that the gallery’s ownership claim was unviable under the Uniform Commercial Code because the delivery never occurred. In an effort to resolve the competing claims without litigation, the parties reached an agreement in December 2023: Maddox would provide LAC with a series of alternative collateral (focused on works by McCormick and Willem) in exchange for apartments in LAC’s collection
LAC now alleges that Maddox participated in a “pump and dump” scheme in which a network of actors artificially inflated auction prices for works by McCormick and William, sometimes reaching 10 to 15 times the pre-sale estimates set by auction houses, and then used these inflated numbers to justify trades and sales of their inventory. According to LAC, auction prices for both artists fell after the alleged bid-rigging stopped, with the lender saying its holdings were worth “a fraction” of the works represented by Maddox. LAC further alleges that Maddox CEO and Director John Russo assured LAC in a September 2023 email that “our valuation is quite conservative” and that “any sale would likely result in a better outcome than what we conclude.” LAC is seeking compensatory and punitive damages.
Nick Sharp, co-founder and managing director of Maddox Gallery art news In an email, it “categorically denies LAC’s claims.” He slammed the accusation as “bizarre and irrational” and said it was “premised on wild, outrageous, speculative and untrue conspiracy theories.” LAC, which has offices in New York and Palm Beach, among other places, did not respond art newsRequest for comment.
Maddox’s Sharp argued in an email that the gallery and LAC had a “bona fide dispute” over the ownership of certain artworks. He said the matter was resolved in 2023 through a private non-disclosure agreement, under which LAC transferred the controversial works to the gallery in exchange for a number of replacement works. Sharp confirmed that some of the works provided to the LAC as replacements were by William and McCormick.
“LAC had full knowledge of and ample opportunity to review each replacement prior to entering into the 2023 Agreement,” Sharp said. “LAC’s recent lawsuit against Maddox is a malicious, transparent and baseless attempt to unwind the 2023 Agreement that LAC entered into voluntarily with its eyes wide open.”
Sharp argued that LAC’s claims are based on a “conspiracy theory” that Maddox violated the parties’ agreement and “somehow orchestrated a massive international conspiracy to manipulate the art market and inflate auction prices for William and McCormick’s works, all in an apparent effort to induce LAC to participate in the parties’ 2023 art transactions.”
“LAC has found virtually zero supporting evidence for its outlandish, irresponsible and false claims,” he added. “Maddox has never been involved in anything even remotely similar to the scheme described by LAC, nor would Maddox be involved in such a scheme. In fact, Maddox has never directly or indirectly bid on, purchased, participated in the sale of, or sold at auction any work by Willem or McCormick.”
Sharp said Maddox Gallery, through its U.S.-based attorneys, filed a complaint to dismiss and is awaiting a court ruling on the motion. “Maddox is very confident that his position will be vindicated and that the courts will ultimately reject LAC’s baseless allegations,” he said.
While the case is still ongoing, the presiding judge, Robert W. Lehrburger, filed a request for international legal assistance with the UK auction houses Christie’s and Sotheby’s UK, where several of the works in question have been auctioned.
