In recent art world news, Verisart has launched the “P8Pass,” developed in partnership with online auction house Paddle8, to offer blockchain certification and authentication services to the worldwide art marketplace.  According to Paddle8’s website, the “P8Pass is a digital certificate with data encoded continuously onto the Bitcoin blockchain.  The certificate will be offered for any work of art or object purchased on Paddle8 and will detail provenance including ownership history and artist authorship.  P8Passes will leverage the Bitcoin blockchain to build a decentralized database containing certificates of authenticity and provenance for artworks providing a guarantee, accessible and verified at any time.”  Buyers, consignors and partners will have access to the P8Pass in all curated and benefit auctions featured on Paddle8.

Paddle8 believes that the P8Pass has “the potential to significantly reduce transaction costs for the trade with art [and] collectibles and broaden the market by including new buyers encouraged by authentication process simplicity and transaction safety offered by the P8Pass blockchain product, the risks traditionally being the primary reason for affluent consumers to stay away from the art trade.”

Paddle8’s strategic investor, The Native SA, believes that this innovative new application of blockchain technology to the art market has “the potential to disrupt the art market for good[.]”

Verisart claims to be “the world’s leading platform to certify and verify artworks and collectibles using the Bitcoin blockchain.”  Since the start-up’s 2015 launch, Verisart has offered contemporary artists a simple way to generate permanent certificates of authenticity and reduce the extent of fraudulent activity.  Verisart “combines museum certification standards, distributed ledger technology and image recognition to its provenance and registry services.”

In addition to its partnership with Paddle8 on development of the P8Pass, Verisart has partnered with ArtSystems to offer blockchain certification to leading galleries throughout the world.  This would be the first art inventory management platform to integrate such kind of blockchain-based certificate.

New start-up Codex Protocol is another player, among others, entering this dynamic growing field of placing art on the blockchain.  Specifically, the start-up is a blockchain-based decentralized title registry for art and collectibles.

This is certainly a fascinating area that I will be keeping an eye on in the application of blockchain technology to the global art market.

In recent art world news, a Manhattan art dealer, Ezra Chowaiki, who was accused of defrauding art collectors and dealers around the country last year, has pleaded guilty to one count of wire fraud in the multi-million dollar art fraud case.  Chowaiki admitted last week in New York federal court that he had made fraudulent agreements for the purchase and sale of artwork through his Manhattan art gallery, Chowaiki & Company Fine Art.  Rather than honor these agreements, Chowaiki used the funds and artwork for unauthorized purposes.

According to federal prosecutors, Chowaiki fraudulently transferred more than $16 million of artwork between 2015 and 2017.  “In some instances, Chowaiki sold artwork, purportedly on consignment, without the owners’ authorization.  In other instances, he took money from clients purportedly to purchase artwork, and kept the money but purchased no art.”

The victims of the fraud were unnamed, but according to court filings they include art collectors based in Pennsylvania and Toronto, and a Cayman Islands company managed by an art dealer who conducts business in Tokyo.

The court ordered Chowaiki to forfeit the amount traceable to the offense (over $16 million), and over 20 artworks, including works by Chagall, Degas and Picasso.

Last December, Chowaiki was charged with a single count of the following offenses:  conspiracy to commit wire fraud, wire fraud, and interstate transportation of stolen goods.  Chowaiki surrendered to federal authorities that same day and was released on $100,000 bond.  Chowaiki’s Manhattan art gallery had filed for bankruptcy one month earlier in November 2017.  The art dealer’s sentencing is set for September 12, 2018.

This case is illustrative as to why art collectors should exercise due diligence before working with art dealers in the purchase and sale of artwork.

 

In recent art world news, a coveted David Hockney oil painting titled Pacific Coast Highway and Santa Monica (1990), featuring a colorful California landscape along the Pacific Ocean, has been added to Sotheby’s upcoming contemporary art evening sale on May 16 in New York.  The work carries a $20 million to $30 million estimate, which if sold in the estimate range the sale would set a record for the artist at auction.

Sotheby’s has stated that Hockney’s Pacific Coast Highway and Santa Monica painting represents “a true triumph of his singular vision:  a panoramic and kaleidoscopic paean to his adopted hometown.”

The artist’s prior auction record involved his six-part paneled painting titled Woldgate Woods, 24, 25, and 26 October 2006, which sold at Sotheby’s for $11.7 million in the fall of 2016.  The work features an autumnal scene of East Yorkshire.

Notably, even if the vibrant Pacific Coast Highway and Santa Monica painting sells at the lower end of the estimate, Hockney’s auction record will effectively double within a short period of just under two years.  The painting is said to be offered from an unnamed private collection.

For further information on Sotheby’s upcoming contemporary art evening sale of the Hockney painting in mid-May, please click here.

In recent art world news, specialist global fine art insurer Hiscox in partnership with London-based art market research firm ArtTactic has published its sixth annual Hiscox Online Art Trade Report 2018.  This latest report reveals an online art market worth an estimated $4.22 billion (up 12% this past year).  While this represents a solid year on year increase, it is notable that this was lower than the 15% growth in 2016, and the 24% growth in 2015.  This week’s Art Law blog post will highlight several key findings from the report.

Fewer art buyers buy art online, but those that do spend more.  Approximately 43% art buyers bought art online in the past year (down from 49% in the previous year).  Notwithstanding the decrease in online art buyers, the share of online art buyers paying (on average) more than $5,000 per fine artwork increased to 25% (up from 21% the previous year).  Notably, active online art buyers are also buying more online art than in previous years with 74% making multiple online art purchases (up from 65% in 2017).

Lack of price transparency is an issue for new online art buyers.  While existing art collectors are used to lack of price transparency in the purchase of art, for 90% of new art buyers, lack of price transparency is a significant issue that isn’t being addressed.

New media art is gradually making traction.  New media art (e.g., video or digital art) is gaining traction right behind preferred mediums, paintings and prints, for online buyers.  About 17% of online art consumers purchased new media art this past year and average prices paid for same have seen a gradual increase.

Significant growth for mobile commerce and Instagram is preferred platform among art buyers on social media.  The use of a mobile device to buy art has steadily climbed from 4% in 2015 to 20% in 2018.  As for social media, 63% of art buyers consider Instagram as their preferred platform (up from 57% in 2017 and 48% in 2016).  Instagram has become a key tool for the art industry in reaching consumers beyond the existing art market with nearly 1 billion users.  For the Art Law blog’s recent coverage on the effect that Instagram is having on the art world, click here.

Higher rate of industry consolidation is expected in the future and online auction market is expected to be highly competitive.  As a result of the number of new mergers and acquisitions that took place this past year, 81% of online platforms are expecting a higher rate of consolidation going forward, especially in the form of vertical mergers.  The online art auction market is expecting a highly competitive environment this year.

Third-party marketplaces are helpful sales tools.  Perhaps not surprisingly 75% of galleries used third-party marketplaces to sell art online in 2018—this is up from 59% in 2017 and 41% in 2016.  Nearly 20% are presently using such marketplaces as an outlet for at least half of their online sales (up from 3% in the previous year).

Prevalence of cybercrime hitting platforms and galleries affects buyer confidence.  Over half (54%) of platforms and nearly 30% of galleries have been targeted in an attempted cyber attack this past year (10% to 15% of attempts were successful).  Just under half (41%) of online art buyers indicated that they are concerned or very concerned when buying art online.

High expectations for incorporation of blockchain technology, but minimal adoption.  Over half (60%) of online platforms believe that the use of cryptocurrencies will be the way blockchain technology makes its debut in the online art market.  However, only 7% presently accept cryptocurrencies as a payment method and just under 10% have embedded blockchain technology into their businesses.  Further, well over half (64%) of online platforms believe that using blockchain technology as a “title/ownership registry for the art and collectibles market” will be the “most successful use of blockchain technology in the future.”

Regulatory readiness for forthcoming EU regulation is questionable.  The new General Data Protection Regulation (“GDPR”) is coming into effect on May 25, 2018 and will have widespread applicability as it seeks to unify data privacy standards and provide greater data privacy protection for citizens of the European Union.  Surprisingly though, 41% of galleries and 21% of online platforms surveyed were unaware of this forthcoming new regulation and many were unprepared for it.

For those interested in reviewing the widely anticipated sixth annual Hiscox Online Art Trade Report 2018 in its entirety, click here.

 

In recent art world news, and as a follow up to last week’s post on the Art Law blog, with legal hurdles now overcome, over a dozen artworks from the Berkshire Museum’s art collection are set to be offered for sale at auction next month at Sotheby’s New York in connection with the institution’s efforts to raise a total of $55 million. The lots include works by Norman Rockwell (high estimate of $10 million), Frederic Edwin Church ($7 million), Alexander Calder ($3 million), and Francis Picabia ($1.2 million).

Sotheby’s estimates that the lots could generate between $20.2 million and $28.9 million in sales after being sold at auction in mid-May. The sum from those works will be combined with an unknown sum that the museum received from the earlier announced private sale of its treasured work by Norman Rockwell, “Shuffleton’s Barbershop” (1950), to an institution (recently reported as the Lucas Museum of Narrative Art) that will keep the work on public view.

The Pittsfield, Massachusetts based museum hopes to reach its goal of $55 million through the sale of the lots at auction next month and the private sale of Shuffleton’s Barbershop. Whether the museum will be able to reach its goal depends on how much the museum received for the Rockwell masterpiece, Shuffleton’s Barbershop, which depicts a group of men playing music at the rear of a storefront late in the evening. Sotheby’s, the broker of the private deal, has said that the sales figure is confidential.

When Shuffleton’s Barbershop was set to be offered for sale at auction last November at Sotheby’s, the work was estimated at $20 million to $30 million. The auction was halted due to legal challenges that led the Massachusetts Appeals Court to hold off the sell-off of works while the state’s attorney general’s office conducted an investigation of the museum’s plans.

With the legal hurdles now cleared, the first sales of the lots from the museum’s collection are set to take place at Sotheby’s Impressionist and Modern auction the evening of May 14, when works by Francis Picabia and Henry Moore will be offered at auction. The museum’s highest estimated lot, Norman Rockwell’s Blacksmith’s Boy—Heel and Toe (1940), will round out the auction sales at Sotheby’s American Art sale on May 23.

It will be interesting to see if the Berkshire Museum is able to achieve its goal of $55 million after next month’s auction sales. If the museum hits the figure, additional works from its collection will not need to be sold.

In recent art world news, last week the Berkshire Museum has secured court approval to sell as many as 40 artworks from its collection, including works by Alexander Calder, Albert Bierstadt, Francis Picabia, and Norman Rockwell, as part of a “deaccessioning plan” that has been widely criticized by “museum groups and arts advocates who say it could encourage other museums to sell off works they hold in public trust.”

In a ruling by Justice David Lowy of the Massachusetts Supreme Judicial Court issued last Thursday, it was decided that “the museum had sufficiently established a need to sell the works, which could raise upwards of $55 million, in order to continue operations.”  In reaching its decision, the court deferred to the state’s attorney general, who has oversight of charitable organizations in the state, and who had conducted an investigation and reached a conclusion in the museum’s favor.  The court’s decision paves the way for at least some of the works to be auctioned for sale at Sotheby’s in New York, and for the private sale of the treasured Rockwell painting to an unnamed institution in a deal that was earlier approved by the state’s attorney general.

The museum’s leadership has said that it is running a structural deficit and without a cash infusion the museum will be forced to eventually close.  In particular, the museum’s leaders have said that the ability to sell the artworks is necessary due to a decrease in fundraising opportunities in the region.  Under professional guidelines, art sales are usually only allowed when funds are used to acquire other artworks or, in some instances, maintain a collection.

The museum has said that it intends to use the sale proceeds to build an endowment, renovate its building, and embark on a “New Vision” with particular emphasis on science and technology.

The Association of Art Museum Directors (“AAMD”) has said in a statement that the court’s decision “to approve the Berkshire Museum’s planned art sales addresses outstanding legal questions.  [However,] [i]t does not resolve the violations of ethical and professional standards that will occur when the museum’s plans are implemented.”  The AAMD is considering “censure and/or sanctions” against the museum in connection with any sales that result in funds being directed toward operations or endowments.

The earlier agreement reached between the attorney general’s office and the museum requires that the works be sold in three portions such that if the target figure ($55 million) is reached before one of the later portions is offered for sale, the later portions will not be sold.  Those opposed to the sale argued that because the museum is able to structure the portions, a substantive restriction is not represented in the parties’ agreement.

For detailed coverage on the legal battle of the Berkshire Museum, please see “Berkshire Museum Sell-Off Approved by Top Massachusetts Court, Ending Lengthy Legal Battle,” published online by ArtNews on April 5, 2018.

Element Paints writes:

Art theft is a major problem all around the world. With an estimated total loss of up to $6 billion, the crime is second only in dollar value to arms dealing, drug trafficking and money laundering.

A recent analysis of the INTERPOL (International Criminal Police Organization) art theft database performed by Element Paints has revealed some interesting details about what these art thieves are up to.

Which Countries Are Most Affected by Art Theft?

Chart - Countries with the Most Art Theft

Four countries in the Middle East earn the top spots for art theft. With Iraq, Afghanistan, Syria, and Libya by far the largest targets for art thieves. It seems the chaos that exists in these war-torn countries makes them an ideal target. Unfortunately, few stolen items from this region are ever recovered.

France, Austria, Germany, Ukraine, Romania, and Belarus round out the top ten, but generally these countries recover most of their stolen art. Unfortunately Middle Eastern countries do not, and the majority of their stolen pieces are never recovered.

What Kind of Art Is Stolen?

Chart - Top 10 Most Popular Objects with Art Thieves

Both sculptures and paintings make up the largest proportion of stolen items. The reason for this is unknown, it could be because these types of pieces are very common, or perhaps they are highly sought after on the black market.

Ceramic, gold and silverware, weapons, icons, and coins are also popular among thieves. Weapons, such as shields and swords, were surprising to find in the top 10 categories of stolen items but are obviously quite sought after. Religious items, furniture, and glassware also make the list, but these are not nearly as popular as the other art objects. Furniture is obviously difficult to steal and conceal, and glassware would likely have transportation issues.

Where is the Stolen Art Going?

Chart - Where Art is Stolen and Recovered

Perhaps the most shocking revelation from this data analysis is where the stolen art ends up. It’s abundantly clear that most pieces will end up in Europe.

Virtually all the art stolen from Europe stays in Europe, although a small portion finds its way to Asia and the Americas. Almost all the art stolen from Asia and Africa ends up in Europe. Even the majority of art stolen from America ends up in Europe.

This fact is further highlighted by the fact that Paris is the number one city for recovered pieces for stolen art. Interestingly, Arandelovac, a small town in central Serbia, also recovers a lot of stolen art. This is likely a stop on the corridor from the Middle East to Europe.

Chart - Top 10 Cities Where Stolen Art is Recovered

All the data for this report was pulled from the public INTERPOL art theft database, and the graphs above are just a few highlights from the report. If you’re interested in learning more about international art theft then you can read the full art theft report on the Element Paints website.

In recent art world news, for a long time spanning many decades, visitors to the world-renowned tomb of King Tutankhamen (“King Tut”) in Egypt have noticed unsightly brown spots covering the wall murals in the Egyptian pharaoh’s burial chamber.  The brown spots have been the subject of much speculation.  For years, Egyptian authorities were concerned that the spots may be from living microorganisms stimulated by “humidity and the sweaty bodies of tourists.”  Scientists from the Getty Conservation Institute in Los Angeles have recently completed an analysis of the wall murals determining that the brown spots are not alive and do not pose a threat to the tomb’s attractions.  In addition, chemical, DNA and microscopic analysis confirmed that the brown spots were microbiological in origin.

This study was part of [a] larger, multimillion-dollar, nine-year-long collaboration between the Getty and Egypt’s Ministry of Antiquities designed to assess the condition of the tomb and help prevent further deterioration.  Their work has led to the creation of a new ramp and railings to better control visitor access; guidelines for maximum number of visitors to control humidity and carbon dioxide levels; and the installation of a filtered air supply and exhaust ventilation system.”

The scientists’ work also included an analysis of the flaking of paint on the wall murals lining the tomb, which was especially an issue in areas of black and red pigments.  While there has been a loss of pigment historically, the scientists have stabilized the affected areas by carefully inserting material below the flake to hold it in place—though they could not push it back due to the brittleness of the affected areas.

The conservation studies and treatment occurred without the restriction of normal visiting hours at the tomb with the exception for a one month period in 2016.  The tomb was closed that October for the temporary move of the mummy for the installation of new flooring and railings.

Because the brown spots had penetrated into the paint layer of the murals and attempts to remove them would most likely endanger the artworks, the spots will remain.

Lastly, on a related note, in celebration of the upcoming 100th anniversary of the discovery of King Tut’s tomb, the California Science Center in Los Angeles is currently featuring the world premiere of “King Tut:  Treasures of the Golden Pharaoh”.  The new exhibition claims to be the largest King Tut exhibition ever toured with over 150 authentic artifacts from King Tut’s tomb, 60 of which have never traveled outside of Egypt until now.  The exhibition runs for a limited time from March 24, 2018 through January 6, 2019.

 

 

In recent art world news, following last month’s federal district court ruling that a New York City developer violated the Visual Artists Rights Act (“VARA”) when he demolished well known graffiti space, 5Pointz Aerosol Art Center, the 5Pointz graffiti artists recently requested that the developer pay their attorneys’ fees totaling $2.6 million.  In last month’s ruling, the judge ordered the developer to pay $6.75 million in damages to the graffiti artists for his willful violation of VARA.  Our recent coverage of the aerosol art litigation can be found on the Art Law blog here.

As an amendment to the US Copyright Act, VARA’s dictate that courts “may . . . award a reasonable attorney’s fee to the prevailing party” covers the 5Pointz case.

The 5Pointz artists argue that they should be reimbursed for fighting a case that was “unprecedented in both its scope and its subject matter,” and one that “stands to shape the history of art itself in the United States.”

The plaintiffs should receive [fees] in order to encourage other attorneys to assume the risk of fighting for the cherishing and preservation of public art in the United States and to fully compensate the plaintiff attorneys for their path-breaking work and substantial assumption of litigation risks and costs on behalf of the large group of plaintiff artists[.]”

With a requested total $2.6 million in attorneys’ fees from the 5Pointz litigation, one may or may not regard such high amount as “reasonable” to justify an award to the artists.

 

 

In recent art world news, France’s highest court, the Cour de Cassation, issued a ruling on March 7, 2018 that ends the lengthy dispute between the heirs of Peggy Guggenheim’s daughter, Pegeen Vail, and the Solomon R. Guggenheim Foundation based in New York.  The court has dismissed an appeal by Guggenheim heirs who sued the foundation in 2014, alleging that it had failed to respect Peggy Guggenheim’s wishes in its management of the Palazzo Venier dei Leoni in Venice, Italy and the modern art collection it contains, which was donated and bequeathed to the foundation by the late collector.  Our earlier coverage of the parties’ long-running legal dispute was featured on the Art Law Blog in July 2014.

As some background, Pegeen Vail’s heirs first sought legal action against the foundation back in 1992.  That case was dismissed, however, before the heirs’ appeal was heard, the foundation and heirs had reached an agreement in December 1996.

Nearly 20 years later in 2014, the heirs sued the foundation again, alleging that the organization had “disrespected Peggy Guggenheim’s wishes by accepting the gift of 83 post-war and contemporary works bequeathed by the collectors Rudolph and Hannelore Schulhof and displaying these in Peggy Guggenheim’s Venetian palace.”  In 2013, the late collector’s works were moved to storage to provide space for a four month exhibition of the Schulhof bequest.

In its ruling, the court determined that the 1996 agreement between the parties “imposed no constraint on the number or the duration of the displays or other collections, nor did it require a constant presentation of all the works” in the late collector’s collection.  The court further determined that the plaintiffs “did not establish” that the display of the collections donated by Schulhof and others “damaged the reputation” of Peggy Guggenheim’s own collection and they did not represent the “failure” of the foundation to fulfill its obligations.

The plaintiffs also claimed that the foundation had desecrated the late collector’s burial site.  Guggenheim’s ashes were interred in the gardens of her Venetian palace beside those of her beloved dogs.  The heirs argued that the foundation had disrespected the site with the display of works donated by Patsy and Raymond Nasher in close proximity and “profaned” her final resting place by leasing the garden for private events.

The court disagreed and ruled that under Italian criminal law (applicable in this suit) the foundation’s management of the late collector’s burial site had not undermined “the memory of the deceased person” and that events held in the garden did not constitute “profanation”.  The plaintiffs were ordered to pay the foundation €3,000.

For further information on this lengthy legal battle between Guggenheim’s heirs and the foundation, see Case dismissed:  France’s highest court rules in favour of Guggenheim foundation, published online by The Art Newspaper on March 8, 2018.