Maddox Gallery, which has spaces in London and Dubai, has been accused of inflating the value of artworks used as collateral for loans. The claim was leveled against the gallery by Luxury Asset Capital (LAC), a lender that provides loans secured against high-value assets, according to a civil complaint filed last August in the US District Court for the Southern District of New York.
According to the complaint, LAC alleges that Maddox provided knowingly false “good faith estimates” of the secondary market value of artworks by Duncan McCormick and Albert Willem in order to induce LAC to accept those works as substitute collateral in exchange for a valuable George Condo painting.
The dispute traces back to July 2022, when LAC made several loans to an art dealer named Seth Carmichael, accepting as collateral a pool of blue-chip artworks by artists including Condo, Rashid Johnson, and Robert Nava. After Carmichael defaulted on the loans, Maddox contacted LAC, claiming it had previously purchased some of the same works from Carmichael but had never taken possession of them. LAC’s counsel told Maddox, according to the complaint, that the gallery’s title claims were not viable under the Uniform Commercial Code because delivery had never occurred. To resolve the competing claims without litigation, the two sides struck a deal in December 2023: Maddox would provide LAC with a pool of substitute collateral—highlighted by works from McCormick and Willem—in exchange for the Condo in LAC’s collection
LAC now claims Maddox had been involved in a “pump and dump” scheme in which a network of actors artificially bid up auction prices for McCormick and Willem works—sometimes to 10 to 15 times the pre-sale estimates set by auction houses—and then used those inflated figures to justify trades and sales from its own inventory. After the alleged bid-rigging ceased, according to LAC, the auction prices for both artists fell, and the lender says it was left holding works worth “only a small fraction” of what Maddox had represented. LAC further claims that Maddox CEO and director, John Russo, reassured LAC in a September 2023 email that “our valuations were quite conservative” and that “any sales will most likely generate a stronger result than what we have concluded.” LAC is seeking compensatory and punitive damages.
Nick Sharp, Maddox Gallery’s co-founder and managing director, told ARTnews in an email that it “categorically denies LAC’s claim.” He slammed the accusation as “bizarre and irrational” and said it’s “premised upon a wild, outrageous, speculative, and untrue conspiracy theory.” LAC, which has offices in locations including New York and Palm Beach, did not respond to ARTnews‘s request for comment.
Maddox’s Sharp contended in his email that the gallery and LAC entered into a “good-faith dispute” over the ownership of some artworks. He said the matter was settled in 2023 through a private and confidential agreement, under which LAC transferred the disputed works to the gallery in exchange for a number of replacement pieces. Sharp confirmed that some of the works provided to LAC as substitutes were pieces by Willem and McCormick.
“LAC had full knowledge of each of the substitute pieces, and a full opportunity to vet each of these pieces, before entering into the 2023 deal,” Sharp said. “LAC filed its recent lawsuit against Maddox in bad faith, and in a transparent and baseless attempt to unwind the 2023 deal to which LAC voluntarily entered with its eyes wide open.”
Sharp argued that LAC’s claim is based on the “conspiracy theory” that Maddox breached the parties’ agreement by “somehow orchestrating a massive international conspiracy to manipulate the art market and inflate auction prices for works by Willem and McCormick, all apparently to induce LAC to enter into the parties’ 2023 artwork exchange.”
“LAC has identified literally zero supporting evidence for its outlandish, irresponsible, and false claim,” he added, saying that “Maddox has never been party to anything even remotely resembling the scheme LAC describes, nor would Maddox ever involve itself in such a scheme. Indeed, Maddox has never once bid on, purchased, entered for sale, or sold at auction any work by Willem or McCormick, either directly or indirectly.”
Sharp said Maddox Gallery, through its US-based counsel, moved to dismiss the complaint and is now awaiting the court’s decision on that motion. “Maddox is highly confident that its position will be vindicated, and that the Court will ultimately reject LAC’s baseless allegations,” he said.
While the case is still in process, the presiding judge, Robert W. Lehrburger, filed requests for international judicial assistance for the taking of evidence from Christie’s UK and Sotheby’s UK, where several of the works in question appeared at auction.
