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.