In the dying days of this past summer, with the back-to-school feeling just starting to take hold, the BBC put out a two-part documentary on the grimly compelling story of art world wunderkind Inigo Philbrick, who in 2022, aged 34, was sentenced to seven years in prison for defrauding friends, acquaintances and clients out of at least $86 million, in a complex web of art deals.
Nobody who read the Vanity Fair piece that accompanied Philbrick's early release last year would have been expecting much contrition, but, even so, the cheerfully unrepentant face he presents in this film is jarring.
Both the criminal proceedings and civil litigation arising out of Philbrick's dealings revealed that he was in the habit of selling shares of more than 100% of individual artworks to multiple buyers, as well as using works (sometimes the same works) as collateral for loans, whilst continuing to deal with them as if they were unencumbered. In the film, Philbrick responds to his former friend and victim Kenny Schachter's description of him as a "Mini-Madoff" by saying that it "really irritated the t**s off [him]".
Philbrick set out his position to Vanity Fair last year as follows:
I’ll have to tick the box for the felony. But I believe the art world is sophisticated enough to understand that I wasn’t Bernie Madoff (who never made an actual investment).
Despite his clear admissions that he created situations in which he had to rob Peter in order to pay invented profits to Paul, Philbrick appears genuinely to believe that it is unfair to describe what he did as a 'Ponzi scheme', on the basis that he was doing some real trading. In the film he says:
I’m obviously in no position to do anything other than say how sorry I am. But there is a small part of me that thinks: what about all the good deals?
[…]
The ambition is to get back to doing what I was doing. I was a great art dealer.
Oh dear.
The reputation of the wider art world does not fare well in the documentary with the cast of character witnesses that is assembled, who variously testify that this is a sector full of bad actors and that Philbrick might be a symptom of its maladies as much as he is the cause of some of its problems. The lazy cliché about the art world being "unregulated" is repeated several times in the programme.
As I wrote in this article about the illegality of conspiring to manipulate auctions, the fact of the matter is that doing business in the art world is far more regulated than most areas of life and commerce. However, moving beyond unhelpful generalisations, there are a few inter-linked takeaways from the Philbrick episode that are worth bearing in mind.
Trading derivatives and operating collective investment schemes should be regulated as such
What most people who say that the art market is "unregulated" are probably referring to is the fact that art is not regulated as a "financial instrument", which means it is not generally subject to market abuse regulations prohibiting insider dealing and market manipulation, or the other sorts of prudential, organisational and conduct of business requirements that apply to trading in derivatives and operating collective investment schemes.
One of the things that 'The Great Art Fraud' does relatively well is explain that the way that Philbrick was trading shares in paintings, without the owners of those shares ever taking possession of or even seeing the paintings themselves, was akin to trading in "futures contracts" or other kinds of derivatives. Dealing in financial abstractions without appropriate regulatory frameworks in place is always likely to be a bad idea, or at least should be recognised as the ultra high-risk game that it is, but the vast majority of the art trade is about buying, selling and moving objects in a way that has nothing to do with derivatives or collective investment schemes and should not be tarred with that same brush.
Open the boxes
Closely linked to the point above, and the enduring aphorism that "possession is nine tenths of the law", in his book All That Glitters, Orlando Whitfield tells an interesting anecdote about how Philbrick once got round the problem of needing to make the same painting by Christopher Wool appear in two warehouses in Switzerland at the same time:
Simple: you place a blank canvas of appropriate dimensions into a crate and send it to the warehouse where the new owner is expecting to take delivery. Because these guys aren't buying art, not really – they are making money – they don't open the boxes.
For goodness' sake, open the boxes.
In the absence of custody rules, parties should agree their own
Also closely related to the first two points in this list is the problem of art world middlemen abusing their position when holding works or funds on their client or principal's behalf. Earlier this year, Lisa Schiff was sentenced to two-and-a-half years in prison for defrauding millions from clients of her art advisory business, with Schiff's eye-watering spending of funds she held on her clients' behalf, often to keep up with the lavish private-jet lifestyle of those same clients, providing some obvious parallels with the Philbrick story.
Elsewhere, I have called for the UK to adopt US-style rules on how galleries should hold artists' funds to save gallerists from the temptation to borrow from those funds to cover expansion plans or, simply, day-to-day costs when sales slow down.
Like many of the gallerists who have gone bust owing artists hundreds of thousands or even millions of pounds in unpaid proceeds of sales, I am willing to give Philbrick the benefit of the doubt in that I suspect he started out as a reckless optimist, rather than someone who intended to misappropriate people's funds from the outset. However, nobody should be in any doubt as to how risky it is to have others holding on to your cash or other assets if they are not regulated in the way that lawyers or bankers are when it comes to client custody arrangements.
In any transaction, it is of vital importance to (1) agree clearly what duties are owed between the parties; (2) fix how and when works or funds will be held or transferred (and to take prompt and robust action when a counterparty deviates from what is agreed); and (3) consider what other tools might be available to mitigate risk, such as the filing of financing statements under the Uniform Commercial Code (UCC) in the US, or registering interests on the Art Loss Register.
The Great Art Fraud was first shown on BBC 2 on 27 August 2025 and is now available to stream on BBC iPlayer
