← The Epstein Chronicles
The Epstein Chronicles
The Epstein Files and the Hidden Economy of Art-Backed Billionaire Loans
00:14:01
The newly released Epstein-related documents highlighted a major financial transaction involving billionaire Leon Black, revealing that he secured a $484 million loan from Bank of America backed by works of art. The loan, documented in materials...
Loading summary
Transcript8 lines
- [00:02]
A
During Memorial Day at Lowe's Shop household must haves for less. Save $80 on the Char Broil Performance Series 4 Burner Grill to chef up something special plus get up to 45% off. Select major appliances to keep things fresh. Our best lineup is here at Lowe's Lowe's. We help you save valid through 527 while supplies last selection varies by location. See Lowes.com for details.
- [00:25]
B
Visit your nearby Lowes. If the world were like a sleep number mattress, everything would adapt for your comfort. Because as your life changes and your body changes, sleep number mattresses adapt and shift to give you personalized comfort night after night. And now everything's on sale during our Memorial Day event. Save up to $1200 on mattresses plus free delivery when you add a base ends Monday. To experience a whole new world of comfort, visit a sleep number store or go to sleepnumber.com sleep number to a
- [00:59]
C
good life Sleep what's up everyone? And welcome to another episode of the Epstein Chronicles. If there's one thing that the rich and the affluent are good at, it's hiding their money. And one of the most effective ways of doing that is to invest in high end art. And that's why you see people like Leon Black with literally billion dollar art collections. Because this is a man who doesn't want to pay taxes, right? And look, I'm not knocking them for that. Who the hell wants to pay taxes? But every year we do. And then you have people like Leon Black, Jeffrey Epstein, and the Epstein class, and they find all kinds of creative ways to make sure they're not paying any money out of their pocket ever when it comes to taxes. And this is exactly what Leon Black was paying Jeffrey Epstein for this kind of tax advice. I mean, did you really think he was paying $150 million for actual tax advice? That would be a bit extreme, no? Seems like quite the bill for basic tax advice. I would think that a guy like Leon Black with so much money would be a bit more frugal, but I guess not. I guess he just wants to blow a bunch of dough on tax advice from a guy that's not qualified to give it. But sure, keep feeding us that ridiculous narrative. Today's article is from cnbc and the headline Epstein Files highlight how wealthy borrow against art collections. This article was authored by Robert Frank. So what happens is they just leverage themselves and borrow, borrow, borrow, borrow. And they never have to even pay it all back. They just keep the Griff going forever. And that's how these Rich people roll. Meanwhile the rest of us are, are getting blasted with what I call the poor people's tax. And what I mean by that is all the extra fees you end up paying if you're poor, God forbid you have bad credit. Meanwhile you have guys like Leon Black who are making literally billions of dollars and hardly paying anything in taxes. A 484 million dollar art loan secured by billionaire Leon Black and disclosed in the latest Epstein Files highlights one of the fastest growing and most lucrative corners of the art world. And this is something that not only people like Leon Black or Jeffrey Epstein were up to. We're talking about people like cartel bosses, international criminal organizations, and of course, oligarchs. And I don't just mean Russian ones. I'm talking about all of them. I mean, how many big mouths who ran around talking about corruption and this, that the other thing ended up being in like the Paradise Papers that exposed a whole bunch of these people for the scoundrels they are. But of course nothing ever came of it, right? Nobody went to prison. Financial sector never really affected, just business as usual. According to a March 2015 document released as part of the Epstein files, Black secured the loan from bank of America backed by works of art. While not unusual for top private banking clients, the loan made headlines for its size and exotic collateral, which included blue chip works by Picasso, Gio Cometti tition, Matisse and others. Art lending, however, has become an increasingly valuable tool for both wealthy collectors and and wealth management firms vying to manage their fortunes. The global market for art loans is estimated at between 38 billion and 45 billion today. According to a report from the Art Tactic, the market is expected to top 50 billion by 2028, growing at about 12% a year. And I expect that to continue to just blow up considering how many of these people are looking for places to stash their money. And without volatile, a lot of different areas are. You can avoid a lot of that volatility by investing in something like high end art because it really doesn't lose its value, right? In fact, it continues to increase and all these people know it. So they're able to borrow by using this sort of art as collateral. But the problem is a lot of times they're borrowing off of money that they never even paid taxes on. And I think a pretty good example of how this all plays out is in the show Billions. There's a part where Bobby Axelrod has all this different art and he is trying to hide the art from people, trying to come get it and I think it illustrates how these high end people will use the art market to try and hide their money. And I think besides real estate, I think that the art market is an area that is being heavily used by these oligarchs. And I think there is plenty of evidence to back that up. I mean, we know that Leon Black for sure was utilizing the art market. And when you start putting the pieces together, it's pretty obvious what he was doing. Now, look, it's one thing to know something, it's another thing to be able to prove it. And considering how little they care about actually following the money here, I highly doubt we're ever going to get to the bottom of any of it when it comes to Leon Black. I mean, just look at what's going on in Congress. They requested to speak with Leon Black. I mean, what. Why not just hit him with a subpoena and force him to come in like everybody else, but instead he gets a cordial invite? Why is that? Why isn't Leon Black being treated like any other possible criminal? Adam Chin, managing partner of International Art Finance and longtime art finance expert, said art loans are a way for collectors to pull cash from paintings that they can also continue to enjoy on their walls. Oh, yeah, you see this painting over here? I drew a $5 billion loan off it. I mean, imagine having that kind of collateral hanging on your wall. Most people have to go and, you know, give their title up to get some money on it. Hey, let me get, you know, five grand on my title and I'll pay it back. And if I can't pay it back, well, you got to take my car now. I can't go to work, can't live my life, etc. But this is all the hustle right here, right? They know these people are never going to default. They'll gladly give these loans out. Just another way to launder money. It's the best of both worlds. Jin said you can monetize an otherwise non income producing asset and it's still great to look at. Well, awesome. I'm glad. I'm glad all of you stiff upper lip types are enjoying yourselves down here on the bottom rung. Not very much fun. Far from signaling a lack of funds, our loans are typically used by the wealthy to provide ready cash, leverage financial investments, and avoid hefty tax bills. Oh, well, what do you know? Shocking, huh? And really, as much as I despise it, we need to look directly at Congress and ask them what they're doing. They allow all this, they write the laws, all These people are just utilizing the loopholes to that already exist. So if Congress cared, they'd write better laws.
- [08:30]
A
During Memorial Day at Lowe's shop household must haves for less. Save $80 on a Char Broil Performance Series 4 burner grill to chef up something special, plus get up to 45% off. Select major appliances to keep things fresh. Our best lineup is here at Lowe's. Lowe's. We help you save valid through 527, while supplies last selection varies by location. See lowe's.com for details.
- [08:53]
B
Visit your nearby Lowe'.
- [09:04]
C
Private banks often grant art loans to top clients at low interest rates, knowing the client has hundreds of millions or even billions in other assets in case the loans default. The interest rate on Black's loan in 2015 was 1.43%, according to the document. 1.43%. How many of you out there are getting that rate? I'll wait. Not very many of you. Now, I'm sure some of you might be, and that's great. I'm. I'm happy for you, but I'm certainly not getting 1.43%. You go out and buy a used car right now and you get it from, like, a credit union or whatever, and you're still going to end up paying like 7.99% on your loan right around there, even with good credit. Now, obviously, it varies and it bounces around, but for the most part, that's right around what you're looking at. Meanwhile, you have guys like Leon Black scoring a 1.43% rate, and you wonder why we all stay poor and they continue to get rich. The bulk of the art lending market is dominated by the auction houses, especially South B's Financial Services, as well as specialty lenders like International Art Finance. Scott Millison, global head of lending at Southeast Financial Service, said collectors use the proceeds for a wide variety of purposes. The company now lends against classic cars as well as art. Lend against anything. If you have some collateral and you're looking to, you know, get a loan, you can find somebody that will probably lend you the money. What it comes down to is the interest rate. That's the most important part, right? What the hell's the vig? And how long is it running? Because that's how you get smashed. It's not the actual loan itself. For the most part, the loan is usually, you know, doable, right? Manageable. It's the excessive fees that get tacked onto it. This tax that tax finance charges. And before you know it, you're looking at six dimes more than you thought the car was going to be. But of course, guys like Leon Black, they don't have those worries and they have vehicles and this art and everything serves a purpose. And for Leon Black, that purpose is to avoid taxes. That was the whole entire scam, the whole plot, the whole entire reason that he was getting advice, quote unquote, from Jeffrey Epstein. Many of our clients borrow against their fine art collections to invest in businesses, pursue new art acquisitions, or release cash without selling works they love, millison said. Chin said many of today's collectors are top leaders in private equity and hedge funds. I bet they are. What did I just tell you? But I'm sure all of them are playing by the rules, right? Since they're used to using leverage to turbocharge their wealth in their investments and businesses, they view leveraging their art collection as a natural extension. Chin estimates that the total value of art held in private hands is between 1 trillion and 2 trillion dollars. With art loans representing a tiny fraction of the total, well under 50 billion. He said the industry has plenty of room to grow. One trillion and two trillion. How much of that wealth do you have hanging on your walls? I can tell you right now, I have zero. Fuck, I don't even have a knockoff Ansel Adams on my wall. Art is the most underleveraged asset on the planet, he said. Art loans also generate lucrative tax benefits. Selling a work of art triggers a capital gains rate of 28%, a higher rate for collectibles than other categories, along with the 3.8 net investment income tax, bringing the top rate to 31.8%. Selling in certain states also triggers state taxes. Well, it should. An art loan, even at today's elevated lending rates, typically is around 8% to 9% is still far more efficient than paying a tax. Plus borrowers can usually keep the art on their walls. That's what this is all about. Taxes. Okay? Ignore everything else and understand this is about them hiding money. That's it. That's the whole story. The art lending business has also benefited from a 2017 tax change that eliminated the use of so called 1031 exchanges in the art market. The practice allowed art collectors to avoid capital gains taxes by swapping one work for for another without the benefit. Many art collectors turn to loans to provide liquidity without the tax penalties. Always a loophole, always a technicality. And that's on Congress, not on the people that are utilizing these loopholes and technicalities. Congress should do better. They should know that they're screwing up or is it that they do know? And they're leaving these loopholes in there because the people that are benefiting are the same people that are donating to them to get them elected. I'll leave it up to you to decide. Chin said that given the art market's recent rebound and falling interest rates, art lending is poised to continue its strong growth. The art market is a strange market, he said, but if you look at every other asset class, eventually it gets fractionalized, securitized and leveraged. It's the nature of of the universe. Well, it should be highly regulated. Has there ever been a market that needs regulation more than the high end art market? So folks, look, this just goes right on top of what we've talked about previously about the high end art market and about how it's utilized as a tax haven for people like Leon Black. And it's been my opinion from the very beginning, when we first learned about Leon Black and his relationship with Epstein, that Jeffrey Epstein wasn't giving him tax advice, not in the traditional sense, but instead was helping him hide that money. And I think as these receipts continue to come out, I think that becomes more clear by the day. So like usual, we'll keep on top of it. And when we have some more information to share, we most certainly will. All the information that goes with this episode can be found in the description box.
- [15:33]
A
During Memorial Day at Lowe's Shop Household must haves for less save $80 on a char broil performance series 4 burner grill to chef up something special plus get up to 45% off select major appliances to keep things fresh. Our best lineup is here at Lowe's. Lowe's we help you save valid through 527 while supplies last selection varies by location. See lowe's.com for details.
- [15:56]
B
Visit your nearby Lowe's.