Speaker 1: 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 you was paying one hundred and fifty
million dollars 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
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 four hundred and eighty four
million dollar art loan secured by a 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 me and 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 want to prison. Financial sector never really affected, just
business as usual. To a March twenty fifteen 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, Geocommetee, Tition, Matisse, and others. Art lending, however,
has become an increasingly valuable tool for both wealthy collectors
and wealth management firms vuying to manage their fortunes. The
global market for art loans is estimated at between thirty
eight billion and forty five billion today, According to a
report from the art tactic. The market is expected to
top fifty billion by twenty twenty eight, growing at about
twelve percent 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 tile, 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 pay 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 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 were requested to speak with Leon Black. I mean,
what why not just hit them with a subpoena and
force them 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 away 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 five billion dollar loan off it. I mean,
imagine having that kind of collateral hanging on your wall.
Most people have to go in, 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've got to take my car now. I can't
go to work, can't live my life, et cetera. But
this is all the hustle right here right. They know
these people are never gonna default. They'll gladly give these
loans out, just another way to lounder 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. Art 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 that already exist.
So if Congress cared, they'd write better laws. Private banks
often grant art loans to top clients at low interest rates,
knowing the client as hundreds of millions or even billions
in other assets in case the loan's default. The interest
rate on Black's loan in twenty fifteen was one point
four to three percent, according to the document, one point
four to three percent. 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 happy for you, but I'm certainly not getting one
point four to three percent. 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 gonna
end up paying like seven point nine to nine percent
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 score on a one
point four to three percent 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 Southeast Financial Services, as well as
specialty lenders like International Art Finance. Scott Millicon, 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 big 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, Millicon said. Chinn 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 planned by the rules right.
Since they're used to using leverage to turbocharge their wealth
in their investments in 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 one
trillion and two trillion dollars, with art loans representing a
tiny fraction of the total, well under fifty 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
antl atoms on my wall. Art is the most underleveraged
data set on the planet, he said. Art loans also
generate lucrative tax benefits. Selling a work of art triggers
a capital gains rate of twenty eight percent, a higher
rate for collectibles than other categories, along with the three
point eight net investment income tax, bringing the top rate
to thirty one point eight percent. Selling in certain states
also trigger stay taxes. Well it should. An art loan,
even at today's elevated lending rates typically is around eight
percent to nine percent. It's 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 twenty seventeen tax change that
eliminated the use of soul called ten thirty one exchanges
in the art market. The practice allowed art collectors to
avoid capital gains taxes by swapping one work for another
without the benefit. Many art collectors turned the 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. Chinn said
that given the art market's recent rebound and following 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 event, it gets fractionalized, securitized,
and leveraged. It's the nature 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 Fox