The Gray Market

How One Dog-Eat-Dog Market Proves That the Art Industry Really Doesn’t Have to Be That Way (and Other Insights)

Every Wednesday morning, Midnight Publishing Group News brings you The Gray Market. The column decodes important stories from the previous week—and offers unparalleled insight into the inner workings of the art industry in the process.

This week, a reminder that we live in a world of our own making…



Let’s talk about art-market psychology. As a gateway, consider this excerpt from a brilliant story published in a major magazine last week:

“The more popular the gallery is on the internet, the more clout they have,” says Molly, a collector in New York. “If you have a really good social-media presence, you can throw your weight around.” (The clout goes both ways: Posting about your new acquisition on Instagram is an indirect way of broadcasting that someone out there deemed you morally worthy enough to be chosen.) She inquired about eight artworks in six weeks from about five different dealers, only to be continually rejected. She finally got an interview with a gallery whose prized exhibition she had seen on social media. They asked to tour her apartment over Zoom. Fine. They asked for her references. Great. But then they asked if she would pay for an expensive art handler. She asked if she could wait—not only was it during the height of COVID, but the cost of the sessions with the handler could be close to $1,000. The person she was dealing with said over email that artworks were investments and suggested she look elsewhere. “I was like, ‘This is so art world,’” she says.

Nice microcosm of the art market in 2021, right? I suspect many of you are nodding your heads, rolling your eyes, or smirking in knowing agreement with Molly about now. Maybe some of you have even been through a similar experience recently, as speculative demand surges in the primary market for emerging talent thanks partly to the rich getting even richer during lockdown. Absurd that it’s come to this, isn’t it? 

I expect a smaller number of you actually read this passage in its original context in the last nine days and are now trying to recall where that was. But if you’re having a hard time making the connection, don’t blame yourself. The reason is that this was not actually a story about the art market—at least not directly. 

Instead, it was a story about the maddening difficulties of trying to adopt a rescue dog in the Empire City during the pandemic, written by Allie Conti for New York magazine. I just swapped out exactly 14 of her original 184 words. Here’s the actual excerpt, this time with the text I replaced in bold:

“The more popular the rescue is on the internet, the more clout they have,” says Molly, a writer in New York. “If you have a really good social-media presence, you can throw your weight around.” (The clout goes both ways: Posting about your rescue dog on Instagram is an indirect way of broadcasting that someone out there deemed you morally worthy enough to be chosen.) She inquired about eight dogs in six weeks from about five different rescues, only to be continually rejected. She finally got an interview with a rescue agency whose cute dogs she had seen on social media. They asked to tour her apartment over Zoom. Fine. They asked for her references. Great. But then they asked if she would pay for an expensive trainer. She asked if she could wait—not only was it during the height of COVID, but the cost of the sessions with the trainer could be close to $1,000. The person she was dealing with said over email that dogs were investments and suggested she look elsewhere. “I was like, ‘This is so Brooklyn,’” she says.

I’m not just doing this because it’s an especially wild example of economist Tyler Cowen’s mantra that there are “markets in everything.” I’m doing it because Conti’s story runs rampant with meaningful parallels between what she calls the “pandemic puppy boom” and our current moment in the art-market cycle, where galleries’ waiting lists for hot young artists are again extending to the length of Medieval scrolls, sending prices soaring on the few works rapidly resold at auction. That means it’s the perfect time to sniff around the lockdown-era tussle over rescue dogs for a scent that can lead buyers away from ruin.

Genevieve Figgis, Untitled (Lady with a Dog) (2013). Courtesy Susan Barrett.

Genevieve Figgis, Untitled (Lady with a Dog) (2013). Courtesy Susan Barrett.


I won’t belabor the Business 101 consonance between the market for in-demand artists and the market for COVID-era canines: huge demand for a small supply of desirable assets. The primary motivation in the realm of rescues, of course, was what Conti terms “a lonely, claustrophobic year in which thousands of white-collar workers, sitting at home scrolling through their phones, seemed simultaneously to decide they were finally ready to adopt a dog.” 

The result in New York was a competitive ambush. Practically overnight, rescue shelters that typically received about 20 weekly applications in the Before Times were bombarded by hundreds of new hopefuls every seven days. Conti relays that up to 50 would-be adopters sometimes faced off for the right to take home a single furry friend. 

More interesting, however, is a related complication of this specialty market: what econ geeks would call a lack of price elasticity. Conti declares early in the piece, “The rescue dog is now, indisputably, a luxury good, without a market pricing system at work to manage demand.” In other words, no matter how many people wanted the asset, its cost never changed. These are adoption agencies, after all, not for-profit breeders willing to capitalize on the emergence of a seller’s market. 

To the everlasting astonishment of people I know outside the art trade, the same is true in the primary market for hot artists. A willingness to overpay gives collectors no advantage, because the system is designed to keep the price fixed regardless of the number of interested buyers. Wealth has a tendency to become necessary but not sufficient. Which means, in turn, that some other mechanism must sort the many candidates into winners and losers.

The mechanism is status, an attribute that gatekeepers in each of these two markets can only ever judge subjectively. In the rescue sphere, Conti cites the example of Zainab, an applicant who has “a leadership role in public education,” a master’s degree, and (in Zainab’s own words) makes “good money”… but was deemed unworthy of 60 (!) different dogs by various rescue agencies. Her breakthrough came when she leaned into her status, creating a multipage résumé that “features testimonials from high-powered friends, including local elected officials.” 

I’ve never heard of collectors deploying this tactic with art dealers in their pursuit of sought-after works, but how different is it really from communicating your institutional ties, your other acquisitions, and even which other art-world names you summer with? Assuming they operate south of the tier where a dealer already knows their reputation on sight, any savvy buyer will be sure to drop data points like these when in pursuit of a fiercely contested acquisition. What is that if not a kind of résumé?

The power of reputation extends into the virtual realm too. Particularly among younger demographics, your online presence increasingly functions as a living testament to your art-world status. Who pays attention to you? Who actually engages with you in public view, and on what terms? What else is in your collection, and are there clues as to how you got it? Where do you travel, what do you do while you’re there, and who do you do it with? This supplementary info can help fill out the reputational picture with details you might not be able to suss out through the art-dealer whisper network. 

As Conti expressed in the excerpt I used to open this column, social-media clout isn’t just a one-way mirror either; it acts as a multipurpose marketing tool. Your social media-affirmed status helps you get the prized asset in the first place, and then advertising that you got the prized asset boosts your social media-affirmed status higher… which in turn increases your chances of getting the next prized asset, and on and on, in a feedback loop of specialty market navel-gazing. What a time to be alive.

Visitors pass in front of a painting by Jean-Michel Basquiat entitled Boy and Dog in a Johnnypump on May 7, 2010, at Art Basel. Photo: Fabrice Coffrini/AFP/Getty Images.

Visitors pass in front of a painting by Jean-Michel Basquiat entitled Boy and Dog in a Johnnypump on May 7, 2010, at Art Basel. Photo: Fabrice Coffrini/AFP/Getty Images.


I can’t decide whether I’m more relieved or depressed to be reminded that the art industry isn’t the only arena hosting these phenomena—and further, that they spread beyond even other collectible markets like design objects, fine wine, classic cars, and sports memorabilia. Their prevalence underscores that we humans (or at least, we humans in rich capitalist communities) almost can’t help but do this nonsense. As Gimlet Media’s Lydia Polgreen put it on Twitter in reaction to Conti’s piece…

Jessica Pierce, a bioethicist and conflicted dog owner Conti spoke to, concluded that the pandemic puppy boom is “driven by a reflection of human narcissism and neurosis,” and if that description isn’t an evergreen one for much of the art establishment, I should probably retire as an analyst immediately. 

The counterpoint, however, is that it doesn’t have to be this way in any market. For proof of this fact in the COVID canine gauntlet, consider Defector cofounder Tom Ley’s response piece “If You Really Want a Dog, You Can Get a Damn Dog.” 

The crux of Ley’s argument (which is more sympathetic than I expected from its headline) is that even in New York, there are dozens of dogs waiting to be adopted from city-run shelters uninterested in the status-based shenanigans of many rescue agencies. Conti’s subjects plunged themselves into the cyclone by fixating on a handful of suppliers with gale-force marketing resources and high visibility among a large-enough demographic of pretty successful, very online New Yorkers (doubly ironic, he emphasizes, because rescue organizations with enormous Instagram followings often just source dogs from the city-run shelters anyway).

You don’t need me to tell you that the same tunnel vision afflicts many, if not most, art collectors during a bull market, but it’s worth emphasizing that they could probably satisfy their art thirst through far less humiliating venues. Assuming, that is, that a meaningful art experience, not a guaranteed status bump, is the endgame. 

At one end of the spectrum, you have more and more artists selling directly to consumers seemingly each day, and each year seems to produce more and more sales channels with light-touch industry infrastructure that are geared toward removing the elitist stigma around collecting. For example, take the Other Art Fair, an international slate of annual in-person and online fairs championing affordable works in cities from New York to Los Angeles to London to Melbourne. Many of the fair’s attendees “have never purchased art before in their lives,” according to director Nicole Garton. “They are looking for a home in the art world, and so a lot of what we do at the fair is to help put people at ease and empower them to explore their own tastes, while having a fun day out.” 

The environment tends to be as important as the artwork when it comes to bringing the art market back down to earth. Just as at kindred spirit Kasseem “Swizz Beatz” Dean’s No Commission fair series, artists double as the exhibitors at the Other Art Fair. Some are “as excited and nervous as the visitors themselves” because they’re showing their work for the first time, Garton said, and all of them tend to be “eager to chat with anyone who shows an interest in their passion.” This aspect transforms the art-discovery process into something vastly more welcoming than the smashmouth status game of the traditional system.  

Collector and producer David Hoberman contemplates Kennedy Yanko's sculpture Anoint (2019) inside Kavi Gupta's booth at Felix 2020. Photography by Tim Schneider.

Collector and producer David Hoberman contemplates Kennedy Yanko’s sculpture Anoint (2019) inside Kavi Gupta’s booth at Felix 2020. Photography by Tim Schneider.

There is support for a more fraternal approach farther up the industry hierarchy too. This weekend, the latest edition of Los Angeles’s homegrown Felix art fair returns to the cabana-bedecked patio of the Hollywood Roosevelt Hotel. Cofounder and veteran collector Dean Valentine stresses that he and his partners in the venture, L.A. dealers Al and Mills Morán, did not intentionally launch Felix to counterprogram the traditional fair model. But he did acknowledge that “every year, with every art fair, it was getting harder and harder to look, to have meaningful conversations, to have an experience” in what often feels to me like the art market’s answer to the cubicle farm. 

“Fairs have become high-speed, high-pressure shopping,” Valentine continued. “We wanted to build something that was a bit more low key, a bit more human.”

Felix’s venue does a lot of the work on this front. “It’s a lot easier to talk hanging by the Hockney pool with a drink in your hand than on a crowded aisle in a convention center, and looking at art in an actual room is a much more immediate and intimate experience than in a fair booth,” he said. (He added that the fair’s braintrust had ideas about how to push the sensibility even further than in past editions, but that COVID restrictions forced them to table those prospects until it comes time to plan the fair’s next February edition.)

And then of course there’s the financial side of the equation. Aside from the true whales, budget constraints limit every collector’s options. But the need to work within your limits can be a golden opportunity rather than a fatal flaw. As Jeffrey Deitch told me for a story on fractional ownership this spring, “If you want to participate in art, there’s great art at every price range.” You just might have to search harder and be more deliberate about what you’re really looking for. 

Or maybe not, according to Garton. 

“Nowadays, it’s fairly common for people to encounter art outside the context of the traditional art world in their everyday lives—from street art, to music videos, to brand collaborations selling at a local box retailer. Art is everywhere, and people naturally gravitate towards the things they love and find inspiring,” she said. “Ultimately, while some broader trends may be influenced by the top of the market, people are trusting their own instincts and buying the art that speaks to them.”

Mr. Doodle at the launch of "Sense of Space" a multi-room sensory art experience in Exchange Square in London in 2018. Photo by David M. Benett/Dave Benett/Getty Images for Broadgate.

Mr. Doodle at the launch of “Sense of Space,” a multi-room sensory art experience in Exchange Square in London in 2018. Photo by David M. Benett/Dave Benett/Getty Images for Broadgate.

Personally, I think that’s as true of first-timers sliding a few hundred bucks directly to an overwhelmed artist at the Other Art Fair as it is of moneyed East Asian collectors bidding works by Mr. Doodle out to the farthest reaches of space at major auction houses.

So maybe you can’t pay up for a unique work by a canonical great without handing over your life to a loan shark. Maybe your status level won’t win you a fresh-from-the-studio piece by the next scorching-hot twentysomething gallery sensation. Maybe you aren’t even interested in, say, an editioned print by a respected mid-career artist offered by a friendly poolside dealer at Felix. 

That’s okay! In fact, I’d argue that the best outcome for the long-term, full-body health of the art market is for a bunch of art lovers to be compelled to expand their viewfinders beyond the establishment channels, the sizzling names, and the hyperbolic headlines. 

So the next time you feel discouraged by cutthroat competition or discriminating dealers in a status-drunk art market, don’t make the same mistake as the upwardly mobile Brooklynites laser-focused on rescue dogs. What’s available elsewhere is just as deserving of a loving home.

[The Cut | Defector]


That’s all for this week. ‘Til next time, remember: if you hate the rules of the game in front of you, choose another one.

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Why U.S. Business Trends Suggest the Pandemic Changed Far Less Than Predicted About the Art Market (and Other Insights)

Every Wednesday morning, Midnight Publishing Group News brings you The Gray Market. The column decodes important stories from the previous week—and offers unparalleled insight into the inner workings of the art industry in the process.

This week, deciding it’s time to revise our priors…



Between spring and fall 2020, pundits and professionals across industries (including the arts) entertained visions of a future radically restructured by the aftermath of COVID-19. About a year later, however, the trends shaping post-pandemic reality in major U.S. cities are looking an awful lot like the same ones that were already in progress before the coronavirus knocked daily life sideways—a prospect with weighty implications for the arts.

When it came to how high-income countries would function differently, even after the distribution of safe, effective vaccines, I think it’s fair to say that three ideas were taken practically for granted inside the depths of the crisis:

  • Air travel for business and pleasure would require multiple years to recover to pre-pandemic levels, if either one ever managed to fully recover at all. 
  • Remote work would transition from a temporary necessity to an ongoing fixture of the economy for white-collar knowledge workers of all types.
  • Between mass work-from-home and lingering fears about the public-health risks of urban density, premier cities like New York, San Francisco, and Los Angeles would permanently lose tens of thousands of residents to a combo of the suburbs, cheaper yet ascendant metros like Austin and Miami, and long-struggling locales ripe for revitalization. 
Passengers seen with the obligatory face masks at the main departure hall in the terminal of Athens International Airport ATH LGAV in Greece. Many countries Greece included reintroduce Coronavirus measures like lockdown, quarantine and travel restrictions. Passengers wearing face masks and gloves, using hand sanitizers as a preventive measure against the spread of the COVID-19 pandemic. Greece and Europe closed the borders for people outside of Europe and the Schengen zone for a long time but Greece started lifting the traffic ban since June 2020 to boost the economy, travel and tourism industry resulting higher cases every day and facing a second wave with bigger numbers in contrast with the low cases during the first wave. Arriving passengers in the Greek airports are subject to coronavirus test. The world passenger traffic declined during the coronavirus covid-19 pandemic with the industry struggling to survive. October, 2020 (Photo by Nicolas Economou/NurPhoto via Getty Images)

Passengers at the main departure hall in the terminal of Athens International Airport ATH LGAV in Greece. (Photo by Nicolas Economou/NurPhoto via Getty Images)

Midway through the very next summer, though, this triple threat already appears to be more empty promises than prescient prognosticating. 

Air travel is the simplest vector to assess. The CEO of Delta Airlines announced in the company’s earnings call last week that “domestic leisure travel is fully recovered to 2019 levels,” propelling the company to its first quarterly profit since COVID reached the U.S. While the long-term fate of overall business travel ironically remains up in the air, art-market players started soaring to sell almost immediately after the initial panic settled. U.S.-based art pros have also booked scores of flights for fall’s must-see (and must-network) domestic events too, cementing a post-pandemic travel mentality in much of our industry regardless of whether or not other trades follow suit.  

The other two expected societal pivots—the large-scale demise of in-office work and in-city living—are more complicated to parse, but they mostly appear to be hurtling down the trash chute together in two of the nation’s wealthiest cities. As wealth goes, of course, art follows. Based on how well recent real-estate trends match up with their pre-pandemic priors, then, it would be wise for those in the trade to abandon last year’s conversation about a brave new post-COVID world and prepare for the resurgence of one we thought we were leaving behind. 

SAN FRANCISCO, CALIFORNIA - JUNE 02: A "for rent" sign posted on the exterior of an apartment building on June 02, 2021 in San Francisco, California. After San Francisco rental prices plummeted during the pandemic shutdown, prices have surged back to pre-pandemic levels. (Photo by Justin Sullivan/Getty Images)

A “for rent” sign posted on the exterior of an apartment building on June 2, 2021, in San Francisco. (Photo by Justin Sullivan/Getty Images)


It’s been a strange 16 months in commercial and residential real estate. Data on migration patterns before, during, and after the domestic onset of COVID confirm there was measured legitimacy to predictions of an exodus from urban strongholds in the U.S. Just make sure you place a heavy emphasis on “measured.” 

It turns out that out-migration only drained two cities to an outsized and uncharacteristic extent: New York and San Francisco. Just as important, neither the reasons for these select mass departures, nor their duration, look much like what the apocalyptic “end of cities” narrative set us up to believe. 

After analyzing roughly 30 million change-of-address requests processed by the U.S. Postal Service last year, the Upshot crew at the New York Times concluded the following about the nation in mid-April of this year: 

In short, as disruptive as the pandemic has been in nearly every aspect of life, it doesn’t appear to have altered the underlying forces shaping which places are thriving or struggling … [T]he metro areas that gained the most net movers in 2020—or lost the most—are almost entirely the same as those in 2019.”

Eric Willett, the research director of domestic real-estate titan CBRE, said the metrics showed “how dramatically durable these long-term trends are, even in the face of a once-in-a-lifetime pandemic.” 

So if you were thinking that COVID would redraw the map of wealth in America, making cities that suffered the most into exciting new hubs of cultural patronage and art-market activity, think again. As Willett put it, “In many ways, the fundamentals in the data show that Austin is the next Austin.” 

What happened in New York and San Francisco, then? A separate study by the Federal Reserve Bank of Cleveland (this time analyzing address changes made on credit reports) found that the two cities’ significant migration losses had less to do with an unusual swell in the number of established residents bailing than it did with an unusual drought in the number of new residents arriving. 

Which makes sense if you think about it. Why uproot yourself to one of the two most expensive cities in America during a year when much of what makes them appealing (restaurants, nightlife, cultural attractions, a wider and better dating pool) won’t even be available to you, especially if you work at a company or study at a school where it was okay to be fully remote? (Also notable but unmentioned, probably because it would have failed to surface in changes to American credit reports: COVID restrictions dramatically slowed immigration to the U.S. from abroad in 2020, and continue to do so today.)

The crucial point here is that delaying an arrival to Gotham or the Bay is not the same thing as aborting the move forever. In fact, the Upshot’s analysts deemed it “likely” that “new hires and young adults who didn’t leave Cleveland or St. Louis for New York or Boston in 2020 [will] do so this coming year.” 

Three months later, their forecast looks prophetic.

SAN FRANCISCO, CALIFORNIA - MARCH 24: Vlad Lapich, with tech startup company Fast, works on his computer on the first day back in the office on March 24, 2021 in San Francisco, California. A limited number of employees at a tech company in San Francisco returned to work in the office as San Francisco and 5 other California counties moved into the orange tier of reopening. The orange tier allows non-essential offices to open at 25% capacity. (Photo by Justin Sullivan/Getty Images)

An office worker in San Francisco on March 24, 2021. (Photo by Justin Sullivan/Getty Images)


As of publication time here in New York, much of Wall Street is either already back in the office or arriving imminently. Thousands of employees at Goldman Sachs and Barclays returned to their desks last month. Blackstone recalled all of its fully vaccinated bankers to headquarters afterward. And Morgan Stanley chairman and CEO Jamie Gorman “expects most of his staff to be back by Labor Day” per the Wall Street Journal

A similar scene is playing out in the Bay Area too, as tech workers flood back into San Francisco and Silicon Valley from their pandemic hideaways. Even more than on Wall Street, the data makes plain the turnabout in NorCal.

More cars (and luxury shuttles operated by major tech companies) darted across the Golden Gate Bridge this May than during any month since February 2020, per Kellen Browning in the New York Times Magazine. Recent numbers from the U.S. Census Bureau and online real-estate marketplace Zillow showed that May 2021 reversed a roughly yearlong downward trend in rental prices in neighborhoods favored by techies. The California Association of Realtors also reported that the median home price in San Francisco has rebounded from a low of $1.58 million in December to hit $1.9 million of late, a figure loftier than before COVID-19 struck.

Those numbers may surprise you, even if you’ve been making a strong effort to stay abreast of the big national picture. As the cofounder of an early-stage, Palo Alto-based investment fund told the Times Magazine, “I think people were pretty noisy about quitting the Bay Area… But they’ve been very quiet in admitting they want to move back.”

However, one constituency not at all caught off guard by this trend are the tech colossi that bet big on a mass reversal of their workforces’ 2020 migration patterns. Google, which will welcome its staff back in September, announced earlier this year it would commit $1 billion to new commercial real estate in California in 2021; the plan is headlined by a pair of new office campuses in Mountain View and more than 7.3 million square feet of office space in nearby San Jose. Twitter, whose workforce returned to the company’s headquarters last week despite CEO Jack Dorsey approving the option to work from home “forever” last spring, will debut major new offices in San Jose and Oakland in 2022. 

In fact, Silicon Valley has become a powerful driver of New York’s back-to-the-office culture too. The industry accounted for approximately 330,000 jobs and over 29 million square feet of office space being leased in the Empire City as of March 2021, per Forbes. Even more remarkable, just four tech companies (Amazon, Apple, Facebook, and Tik Tok) accounted for one-sixth of all NYC office space to enter contract in 2020.

The bottom line is that New York and San Francisco are in the process of re-magnetizing a critical mass of the young money that has made them, respectively, the U.S. art industry’s gravitational center and (still) next great hope. Since this outcome runs counter to so much of what was drilled into us about the alleged “new normal” of 2021 (including by me, I should admit), it’s important for people inside and outside the culture industry to ask…

A visitor to the Sorolla Museum on July 12, 2021. (Photo By Eduardo Parra/Europa Press via Getty Images)


When it comes to staffers’ decisions about when (or whether) to return to New York and greater San Francisco, the above-mentioned major employers in finance and tech obviously placed their thumbs on the scales with their real estate strategies. Veteran bankers are adding more pressure based on their calcified beliefs about the unparalleled value of in-person work. The Wall Street Journal recently reported that ultra-demanding analyst jobs at a behemoth like Goldman are seen as:

a crucial feeder to other areas of finance, with top junior bankers graduating after a couple of years to bigger paydays at private-equity firms and hedge funds. Some of those firms have been hesitant to hire young people who have never worked regularly in an office, Wall Street recruiters say. Like a medical student’s residency in a hospital, the training that junior bankers get in the office is irreplaceable, said Danielle Caston Strazzini, a managing partner and co-founder at private-equity recruiting firm BellCast Partners.

Yet focusing solely on these factors would mean ignoring a crucial variable in the equation. Too often, we anticipate that other people’s choices (especially professional ones) will be determined by a machine-like calculus about costs and benefits. This expectation overlooks that humans are social animals whose emotions frequently outweigh cold logic. 

As the WSJ noted, young bankers working remotely will miss out on expensing black cars home or lavish client dinners out, but even more important may be their lost opportunity to form lasting friendships by fighting alongside their colleagues in the financial trenches. One managing partner compared the analysts’ shared in-office gauntlet to “pledging a fraternity together,” calling the job “a huge part of your social life” in a formative period. I’m reasonably sure the same can be said for many, if not most, of the tech-savvy twentysomethings eager to once again toil away in the Bay, too.

Age and social expectations cut both ways in New York and San Francisco’s migration patterns. In their mid-April analysis, the Upshot team found that the areas of both cities whose residents left in the largest numbers were “richer and more central,” including Tribeca in the former and Pacific Heights in the latter. A huge number of those who called it quits in each also merely moved to suburbs or exurbs that would still allow relatively easy trips back into the urban core. 

This too strikes me as less a product of the pandemic than of the natural progression of life in these metros. By their mid-to-late thirties, large numbers of professionals once thirsty for nonstop nightlife and the fastest possible ascent up the career ladder have reached comfortable positions and pivoted to domestic partnerships and children. City life tends to offer far less to people on the latter side of that divide. It seems like after logging 15 consecutive years of residency here in New York, about 65 percent of the population is required by law to move upstate (whereas in L.A. you are simply required to buy a statement hat).

The numbers support this conclusion. CBRE relayed that “the vast majority of” the 170,000-plus people who left “the vicinity of San Francisco, Berkeley, and Oakland” last year stayed in California. The Upshot charted a slew of municipalities in upstate New York, the Hamptons, and Connecticut that saw their net in-migration rise by between eight percent and 32 percent year over year.

What does it all mean for the U.S. art industry? Probably that the traditional power centers will continue to stretch their legs but otherwise stay put. No surprise, for instance, that Upstate Art Weekend continues to gain power, with more dealers adding northern spaces, and more activations cropping up on an as-valuable basis (such as the New Art Dealers Alliance’s freshly announced collaboration with the Foreland arts complex in Hudson). Just don’t expect to get an announcement about the launch of Frieze Wichita anytime soon.

By no means am I arguing that business in the arts or any other sector is beyond the grasping hands of COVID, either. On Monday, concerns about the Delta variant’s impact on commerce seem to have been largely responsible for pushing the S&P 500 to its steepest one-day dive since May, and London’s “Freedom Day” was tainted by the need for thousands of residents (including, ironically, prime minister Boris Johnson) to isolate due to contact-tracing protocols.

But the long-term trends in U.S. migration have already shown they will withstand the temporary upheaval of the pandemic. Within the art trade, the immunities also kicked in (metaphorically speaking) for domestic air travel long ago. In short, the future is here. It’s just easy to miss because, in so many ways, it’s the spitting image of the past.


[The New York Times Magazine | The Upshot]

That’s all for this week. ‘Til next time, remember: one of the strongest forces known to humankind is inertia.

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Why the Myth of the ‘Good Billionaire’ Is Undermining the Nonprofit and For-Profit Art Industry Alike (and Other Insights)

Every Wednesday morning, Midnight Publishing Group News brings you The Gray Market. The column decodes important stories from the previous week—and offers unparalleled insight into the inner workings of the art industry in the process.

This week, how the top of the ladder has taken the art world sideways…



On Sunday, journalist and author Anand Giridharadas delivered a scalding rebuke of the pinnacle of the U.S. donor class in the New York Times. While mega-philanthropy takes the brunt of the heat, his argument also carries implications for the for-profit side of a polarized art market. The full scope of his analysis clarifies once again how the economics that define the culture business proceed from policy choices made on a much larger canvas. 

At the center of Giridharadas’s sights is Berkshire Hathaway C.E.O. Warren Buffett, the apotheosis of what he calls the “Good Billionaire” myth. In Giridharadas’s telling, the myth holds that America’s largest problem today is only the abuse of its economic system by a few galactically wealthy bad actors, not the design of the system itself. When top earners just behave with a shred of dignity and fellow feeling for the rest of society, everyone prospers together. 

Buffett has long seemed the best evidence for these beliefs. He comes across as humble, uninterested in wealth, and even welcoming of common-sense reforms that would reduce the net worth of his billionaire peers. 

Giridharadas reminds us that then-President Barack Obama named a modest wealth-tax proposal in honor of Buffett, who has frequently railed against the unfairness of a system that allows him to pay a lower proportional tax burden than basically everyone who works for him. He is among the founding billionaires behind the Giving Pledge, the pact in which each signatory commits to donating at least half of their wealth to nonprofit causes before the hearse pulls up. He has lived his entire adult life in Omaha, Nebraska, for crying out loud. How much more down-to-earth could a billionaire get?

Buffett may be the prototype of the virtuous plutocrat, but he’s not alone. Bill Gates has transformed in the public imagination from ruthless software monopolist to benevolent vax daddy of low-income countries. Michael Bloomberg is regularly lionized (even in the past by me) for the millions he gives to cultural and climate nonprofits annually. The latter two characters may come off as less aw-shucks than Buffett, but their examples still seem to suggest mega-wealth delivers society a great good when the right people are involved.

Giridharadas, however, argues that this is all crap—a grand smokescreen perpetuated by the most powerful to keep everyone else ripe for exploitation. He writes:

There is no way to be a billionaire in America without taking advantage of a system predicated on cruelty, a system whose tax code and labor laws and regulatory apparatus prioritize your needs above most people’s. Even noted Good Billionaire Mr. Buffett has profited from Coca-Cola’s sugary drinks, Amazon’s union busting, Chevron’s oil drilling, Clayton Homes’s predatory loans and, as the country learned recently, the failure to tax billionaires on their wealth.

That last sentence refers to both some of Buffett’s investments and, more importantly, a scorching investigation published last week by ProPublica. Using leaked tax records, it didn’t just show that the very wealthiest Americans have been paying meager amounts of federal income tax—and sometimes, none at all—for years, or that the billionaires in question have done so over and over again by completely legal means. It also showed that some of the most cunning plutocrats have been the ones often portrayed as the most virtuous.

(If you’re curious about how they’re pulled it off, the answer is by taking meager annual salaries—Amazon, for instance, paid its C.E.O. Jeff Bezos less than $82,000 annuallywhile taking out a cascading series of low-interest loans against their stocks and other assets, which generate no taxable income until they’re sold. Here’s a good explainer.) 

Buffett’s folk hero persona did not stop him from leveraging this loophole for all it was worth. According to ProPublica, he paid a “true tax rate” of just .1 percent on the $24.3 billion he added to his net worth between 2014 and 2018. Bloomberg managed to pay only slightly more than Buffett during the same span: a 1.3 percent true tax rate on a gain of $22.5 billion. (In statements to ProPublica, both men emphasized that they paid the maximum amount of taxes owed.)

So what does this have to do with the art business? I’m glad you asked.

Activists of P.A.I.N. (Prescription Addiction Intervention Now) protest the Sacklers at the Louvre. Photo by Stephane de Sakutin/AFP/Getty Images.

Activists of P.A.I.N. (Prescription Addiction Intervention Now) protest the Sacklers at the Louvre. Photo by Stephane de Sakutin/AFP/Getty Images.


The term “artwashing” is normally only associated with cultural philanthropy doled out by plutocrats whose wealth can be traced to businesses or products that do direct harm to vulnerable populations. From mass-manufacturing opioids (see: the now-in-the-penalty-box Sackler family), to peddling tear gas (see: former Whitney Museum trustee Warren Kanders), to charging extortionate rates for phone time with incarcerated loved ones (see: former Los Angeles County Museum of Art trustee Tom Gores), it has not been hard in recent years to view plenty of high-dollar giving to arts organizations as outright plunder. 

Yet Giridharadas’s point is that “actually malevolent and disastrously negligent plutocrats” are not the only ones to blame for our wealth-stratified, winner-takes-all society. They just make it easier for the rest of the superrich to hide their ill effects on modern life. In fact, the Good Billionaires are actually the “most dangerous,” because they preserve the fantasy that the structure of the U.S. economy is sound and fair when in reality the foundation has been cracked and crumbling for decades. 

Mega-philanthropy, Giridharadas argues, has been the most effective camouflage for the damage. Set aside the gifts made by clean-conscience donors who would be unaffected by Senator Elizabeth Warren’s proposed “ultra-millionaire tax” on fortunes above $50 million. What makes donations from “supposed Good Billionaires” like Buffett and Bill Gates more insidious than donations made by “the crooks and the scoundrels and the people manifestly looking for quick P.R. highs” is that they give so much moreand are so much better at weaving a righteous narrative around those gargantuan gifts thanks to their spotless public images. 

This also means the Good Billionaires can keep pillaging the economy with little public scrutiny landing on either their own revenue streams or the system irrigating them. Giridharadas notes that in Buffett’s strenuous defense of his tax history, the Oracle of Omaha suggests his large-scale charitable giving does more for the commonwealth than robust payments to the federal government ever could. “I believe the money will be of more use to society if disbursed philanthropically than if it is used to slightly reduce an ever-increasing U.S. debt,” Buffett wrote.

Of course, his framing abstracts that the “ever-increasing U.S. debt” is a bill for actual stuff—some of which people need, and some of which they don’t. On one hand, it includes stimulus payments and enhanced unemployment benefits shown to have “substantially reduced hardship” during the Great Shutdown, as well as a minuscule amount of federal arts funding. On the other hand, it also includes regime after regime of tax cuts disproportionately benefiting a donor class that needed no extra help, as the ProPublica investigation reinforced. 

This is the ultimate irony of Buffett’s defense: if Uncle Sam was more committed to making the wealthiest plutocrats pay their fare share to support the systems that helped make them so rich, the debt wouldn’t be so big! But it isand part of the reason is that it has been spraying Good and Bad Billionaires alike with cash they didn’t need, some portion of which they went on to parcel out to nonprofits that were all the more grateful for the private largesse precisely because public funding has been reduced by the decline in tax revenues collected.

Eli Broad.Photo: Courtesy of Getty Images.

Eli Broad. Courtesy of Getty Images.


Giridharadas’s piece and the ProPublica report were both preceded by the themes in Carolina Miranda’s skeptical Los Angeles Times analysis of the supposed philanthropic void that would be created by this year’s death of mega-collector and arts patron Eli Broad. 

Aside from reinforcing to the East Coast media that L.A. has supported a thriving cultural scene for a century (and even out-donated New York in multiple recent studies), she implored the world to “retire the outmoded idea that the most important factor in a city’s cultural landscape is the presence of some white knight bearing a checkbook and grandiose ideas about turning bulldozed Los Angeles neighborhoods into the Champs-Élysées (as Broad once described his vision for Bunker Hill),” the slice of downtown where his namesake private museum now stands. 

Like Giridharadas’s argument about Buffett, Miranda’s argument zeroes in on Broad to make a larger point. Even within the Los Angeles nonprofit scene, Broad’s record had pockmarks. She reminds readers that LACMA accused him of leaving the museum “holding the bag on $5.5 million in additional construction costs” for the building on its campus otherwise erected with his money and named in his honor. (A Broad spokesperson denied the charge.) He also refused to endow the structure, sticking LACMA with all bills for its upkeep, and then ultimately kept his collection so he could open his own institution

The upshot? Mega-philanthropy isn’t all it’s cracked up to be, even when we restrict our view to the donors’ impact on their home cultural landscape. 

The push for greater public funding of the arts in the U.S. has been gathering steam since last March’s lockdowns. (President Biden is receptive.) Miranda emphasizes multiple examples of robust, broad-based tax initiatives long ago implemented at the state and county levels, from Michigan to Colorado to Los Angeles. In that sense, there’s an argument the nonprofit culture sector could be at least as strong, if not stronger, after the tax code’s billionaire loopholes were closed. 

I would also add that the for-profit art trade could benefit in a similar way from serious U.S. tax reform. Market participants have lamented for years that the middle-class collectors who once sustained a more equitable version of the industry have become an endangered species. Several factors contribute to the change, but many of the most significant are tied up in the larger economy—and all are impacted by the Good Billionaire myth. 

Students pull a mock "ball and chain" representing the $1.4 trilling outstanding student debt outside the second presidential debate 2016. Image courtesy Paul J. Richards/AFP/Getty Images.

Students pull a mock “ball and chain” representing the $1.4 trilling outstanding student debt outside the second presidential debate 2016. Image courtesy Paul J. Richards/AFP/Getty Images.

A recent piece in Bloomberg captured millennials’ generational struggle to build the type of wealth that many boomers took for granted. After adjusting for inflation, millennials paid about 50 percent more for college than boomers, and they face a median home price about 50 percent higher. Meanwhile, their wages have risen only 20 percent over the same span. (If you’re wondering who is driving up prices in the housing market, one big answer is private-equity firms, which have been fattening their portfolios with everything from single-family houses to trailer parks.) 

The costs of simply getting by, let alone getting far enough ahead to collect art, have mounted too. Many U.S. employers offer fewer benefits than in the past, especially as gig work has replaced more traditional full-time and part-time jobs. Companies that provide healthcare, child care, and paid family leave are increasingly rare (particularly in the gallery sector). Starved of so much tax revenue from top earners, government has little capacity to fill the void with social welfare programs (though Biden’s stimulus bill aims to begin reversing the trend).

The U.S. wouldn’t have to become a mythical socialist utopia to fix this situation. Prior to Ronald Reagan’s 1986 tax reforms, the nation’s top marginal tax rate was 50 percent. Just as importantly, only since 1978 has investment income (capital gains) been taxed at more favorable rates than typical wage income.

Subsequent reforms have torqued the system further and further to the advantage of the mega-wealthy, eventually reaching the present-day scenario in which tax law requires Buffett and other billionaires to pay no more than a nominal amount to the common good. And all of it has been at least partly enabled by the philanthropic narrative that the superrich will take care of the rest of us, including when it comes to art and cultural spending.

The folly of that thinking has become clearer and clearer ever since the Great Recession, and the Great Shutdown has exacerbated it. From museums to galleries, from Warren Buffett to Eli Broad, the Good Billionaire myth has brought too many systems to a breaking point. How exactly we should move toward equitable, sustainable solutions is up for debate, but whether we truly need to is not. 

[The New York Times]


That’s all for this week. ‘Til next time, remember: if you look around the room and can’t figure out who the sucker is, there’s a good chance the sucker is you.

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Why Beeple’s ‘Everydays’ Could Be the $69.3 Million Key to Lucrative Venture Capital Investments (and Other Insights)

Every Wednesday morning, Midnight Publishing Group News brings you The Gray Market. The column decodes important stories from the previous week—and offers unparalleled insight into the inner workings of the art industry in the process.

This week, finding a way in through the out door…



On Friday, Stefania Palma broke virtual bread with crypto-mogul Vignesh Sundaresan (AKA Metakovan) for the Financial Times’s “Lunch with the FT” series. The conversation surfaced noteworthy parallels between venture investing and the art market, including a new explanation for Sundaresan’s willingness to pay $69.3 million for Beeple’s Everydays: The First 5,000 Days. It now sounds like his big bid was partly just a means to a greater socioeconomic endanother indicator that the penthouse level of the crypto-art trade is mostly mirroring that of the traditional art trade.

To refresh everyone’s memory in this madcap year, Christie’s originally identified the winning bidder for Beeple’s magnum opus (which was marketed as the first “purely digital work with a unique NFT” ever sold by a major auction house) only as Metakovan, a pseudonymous Singapore-based blockchain entrepreneur behind the combination crypto-investment fund and NFT collection Metapurse. Through his equally mystery-shrouded associate Twobadour, Metakovan communicated to my colleague Eileen Kinsella that he had acquired Everydays because it “has the potential to be the work of art of this generation,” and that he also planned to build a “massive monument” to the piece in virtual space so he could “open it up to the world.”

But the smooth tracks of the narrative got crimped the week after the historic auction. 

First, crypto-sleuth Amy Castor laid out a convincing case that Metakovan and Twobadour were none other than Sundaresan and his longtime communications rep, Anand Venkateswaran—and that the duo was already in business with Beeple prior to the Christie’s auction. Beeple, she noted, owned two percent of the B.20 cryptocurrency Metapurse had used to tokenize ownership of its NFT collection, whose centerpiece is a set of 20 of the artist’s works acquired for $2.2 million on Nifty Gateway last year. (Everydays: The First 5,000 Days is not currently part of the B.20 collection, and Sundaresan does not plan to monetize the record-setting work “yet,” according to an email to the New York Times in March.) 

Then my colleague Ben Davis excavated a slew of undeniably problematic content buried inside the 5,000 images making up the digital collage of Everydays. His discoveries added momentum to one of the most propulsive criticisms of the Beeple sale: that it was just the gaudiest emblem of a retrograde, white crypto-bro attitude dominating the NFT market and big tech more broadly.

Beeple, Everydays – The First 5000 Days NFT, 21,069 pixels x 21,069 pixels (316,939,910 bytes). Image courtesy the artist and Christie's.

Beeple, Everydays – The First 5000 Days NFT, 21,069 pixels x 21,069 pixels (316,939,910 bytes). Image courtesy the artist and Christie’s.

But the day after Ben’s piece went live, Metakovan and Twobadour published a surprise blog post confirming their away-from-the-keyboard identities and announcing that they had bought the Beeple as a way “to show Indians and people of color that they too could be patrons, that crypto was an equalizing power between the West and the Rest, and that the global south was rising.” (Somewhere in the annals of prestige television, Don Draper applauded the reversal.)

All of which leads us to the FT interview. There, Sundaresan expounded on a point alluded to in the narrative-shifting blog post I just mentioned: that crypto ventures comprise a more democratic, meritocratic ecosystem than standard investing and entrepreneurship. 

When Palma asked whether he believed “financial markets are steeped in fundamentally imperialist structures,” Sundresan rallied behind the idea, implying that he has been excluded from multiple investing opportunities because of his cultural heritage, lack of connection to Silicon Valley’s favored U.S. universities (primarily Stanford), and the assumption that his network would be less valuable to a startup’s founders than those of other potential early-stage backers. 

This line of reasoning leads to the key passage concerning the $69.3 million Sundaresan paid for Everydays:

“Once I understand this, I go around it. Now, why will I become Metakovan? Why will I buy Beeple? Because of all of this. Now everyone wants me in the cap table,” he says, referring to the spreadsheet of investors commonly used by start-ups. “That’s how much I have to do, this circus stunt, to be part of cap tables because that’s the kind of people they want in the cap table.” Sundaresan mimes avoiding obstacles with his hands. “It’s historic . . . we cannot change that. We just have to figure out ways to bypass that.”

There’s a lot happening in that excerpt, but I think two of its notes resonate especially loudly here in the art industry. 

Screenshot of images representing Metakovan and Twobadour on the Metapurse "About" page.

Screenshot of images representing Metakovan and Twobadour on the Metapurse “About” page.


First, let’s examine Sundaresan’s rhetorical question, “Why will I become Metakovan?” His subtext here is that cloaking himself in a pseudonymous identity has been more valuable than transparency in an industry where biography is too often destiny. Better to exist as an avatar than a specific person. That way, you can be evaluated on your professional accomplishments rather than penalized for the gap between your background and the profile of the preferred startup investor.

What is that profile? For a starting point, look no further than the headline of the December 2020 WIRED piece “Yet Another Year of Venture Capital Being Really White.” Educational and gender myopia shape the field, too. Richard Kerby of Equal Ventures relayed data estimating that up to 40 percent of venture capitalists were alums of Harvard, Princeton, Stanford, or Yale in 2018—and that up to 82 percent were men. No wonder Monique Villa, a VC at Nashville’s Mucker Capital, described the state of play as follows in a May 2019 TechCrunch op-ed:

Venture has operated in many ways like a club since its inception, where deals are shared within small, private circles, often comprised of people with more in common than not. When investment decisions are made by people who are not representative of our population—instead representative of the interests of a very small percentage of the population (in ethnicity, culture, education, and socioeconomic status)—our economy suffers. 

These race, gender, and social dynamics should sound familiar to art-industry participants, particularly when it comes to the primary market. The gallery sector operates as what economists call a “matching market”: one in which the buyer and seller must mutually select one another in order for a deal to get done. Just as it’s not enough for an investor with the appropriate capital to want to fund an in-demand startup, it’s not enough for a collector with the appropriate capital to want to buy the work of an in-demand artist from a dealer. In each case, the people in control of the asset decide whose money to accept based on whatever subjective criteria they see fit

Most often, a buyer’s reputation and social network play outsized roles in that choice. This can manifest in ways that seem perverse, comical, or both to the outside world. Nothing more consistently gets non-art people to look at me like a psych-ward escapee than when I tell them the average dealer would much rather sell a painting to a museum trustee for $50,000 than to a first-time buyer with no art-world credentials for $75,000. But because of the trustee’s potential value as an evangelist among other collectors (as well as a herd-mentality selling point for the gallery), it’s usually the truth. 

Still, reputations can be built in all kinds of ways, which leads us to Sundaresan’s second rhetorical question in the quote above: “Why will I buy Beeple?” 

It's Beeple! He's also known as Mike Winkelmann. To his mom. Photo: Katya Kazakina.

It’s Beeple! He’s also known as Mike Winkelmann. To his mom. Photo: Katya Kazakina.

Mentioned in the context of “bypassing” historical systems to secure invitations to hot startup investor pools, the comment implies his decision to acquire Everydays had at least as much to do with his venture-capital ambitions as it did with his personal taste, interest in democratizing access to digital art, or even a lust for bragging rights. In the plainest terms, Sundaresan suggested that he thinks the purchase can get him a seat at cap tables that weren’t so interested in his money or connections before. 

To be clear, I don’t think there’s anything scandalous about the man dropping his $69.3 million spending bomb for combined art and business reasons. In fact, I’d argue it could be a savvy maneuver. It’s also one that has been deployed practically every day (ugh, no pun intended) in the art and collectibles markets for a very long time. New Yorkers have the Frick Collection today because its founder, the industrial tycoon Henry Clay Frick, decided that his relocation to the city in 1905 demanded that he begin collecting paintings that “reflected the high society into which he was moving,” according to his biographer. 

It’s not a stretch to surmise from this explanation that Frick saw a connection between apex-level art buys and the trajectory of his business empire. From Wall Street to Hollywood (and beyond), countless non-art deals have taken root at gallery dinners, museum galas, and art-fair receptions, too. It’s more about art’s ability to become a shared patois between elites than it is about monetizing the art itself. The same is true for timepieces, classic cars, sports memorabilia, and other collectibles. Whenever movers and shakers speak the same dialect, all kinds of tantalizing propositions can arise. 

Will Sundaresan’s gambit pay off in the early-stage investing space? Connie Loizos, the Silicon Valley editor at TechCrunch and founder of the daily venture-capital newsletter StrictlyVC, told me that she thinks the answer may depend on his ability to flip Everydays for a big gain. 

“I do think if he manages to sell it for substantially more than he paid, he’ll look like a genius, and, I’m guessing, encounter a lot of open arms,” she said. “Otherwise, people will still take his money, but I’m not sure that includes the very best founders, who have their choice of backers and would prefer investors with a proven track record (and the halo effect they enjoy from that brand association).” 

Whether Sundaresan is successful or not, though, his lunchtime chat with Palma conveys that, to some extent, he’s just deploying a familiar business strategy via a new type of collectible. His rhetoric also renders the $69.3 million Everydays purchase as another instance where the crypto-art trade is mimicking the traditional art trade, not upending it.

Like so much else in art, business, and life, the prospect isn’t shocking, but it doesn’t have to be in order to be worth heeding.

[The Financial Times]


That’s all for this week. ‘Til next time, remember: the more things change, the more they stay the same.

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How a Brazen Hack of That $69 Million Beeple Revealed the True Vulnerability of the NFT Market (and Other Insights)

Every Wednesday morning, Midnight Publishing Group News brings you The Gray Market. The column decodes important stories from the previous week—and offers unparalleled insight into the inner workings of the art industry in the process.

This week, clawing down another art-tech rabbit hole…



In the opening days of April, an artist operating under the pseudonym Monsieur Personne (“Mr. Nobody”) tried to short-circuit the NFT hype machine by unleashing “sleepminting,” a process that complicates, if not corrodes, one of the value propositions underlying non-fungible tokens. His actions raise thorny questions about everything from coding, to copyright law, to consumer harm. Most importantly, though, they indicate that the market for crypto-collectibles may be scaling up faster than the technological foundation can support.

Debuted as part of an ongoing project titled NFTheft, sleepminting serves as a benevolent but alarming crypto-counterfeiting exercise. It aims to show that an artist can be made to unconsciously assert authorship on the Ethereum blockchain just as surely as a sleepwalking disorder can compel someone to waltz out of their bedroom while in a deep doze.

Remember, to “mint” an NFT means to register a particular user as its creator and initial owner. Theoretically, this becomes the first link in a verified, unbreakable chain of custody tethered to an NFT for the life of the underlying blockchain network. Thanks to this perfectly complete, perfectly secure, and eternally checkable data record, the argument goes, potential buyers can trust non-fungible tokens without necessarily having to trust their owners or sellers. These traits add a valuable layer of security that traditional artworks could never rival with their eternally dubious off-chain certificates of authenticity and provenance documents.

Personne may have found a way to dynamite this argument for much of the art NFT market. Sleepminting enables him to mint NFTs for, and to, the crypto wallets of other artists, then transfer ownership back to himself without their consent or knowing participation. Nevertheless, each of these transactions appears as legitimate on the blockchain record as if the unwitting artist had initiated them on their own, opening up the prospect of sophisticated fraud on a mass scale.

To prove his point, on April Fool’s Day, Personne sleepminted a supposed “second edition” of Beeple’s record-smashing Everydays: The First 5,000 Days, the digital work and accompanying token that sold for a vertigo-inducing $69.3 million via Christie’s less than a month earlier. (My emails to Beeple and his publicist about the situation went unanswered.)

In our ensuing email exchange, Personne claimed he then gifted the sleepminted Beeple (Token ID 40914, for the real crypto-heads) to a user with the suspiciously appropriate handle Arsène Lupin, an homage to the famous “gentleman thief” created by Maurice Leblanc and recently reincarnated in a hit Netflix show. (Personne denied he was Lupin to the blog Nifty News.) Lupin then turned around and offered the sleepminted Beeple for sale on Rarible and Opensea, two of the largest NFT marketplaces—both of which eventually deactivated the listings. (Neither Rarible nor Opensea replied to my emails seeking comment.)

Why publicize any of this, you ask? Personne essentially sees himself as a so-called white hat hacker, meaning an ethics-driven coder who exploits technological flaws strictly to demonstrate how they can be fixed. He is a staunch believer in the potential of NFTs and crypto. However, he believes major “security issues and vulnerabilities” in smart contracts have been glossed over to make way for the gold rush. He also claimed to have launched the NFTheft project only after the crypto-community largely ignored or derided his attempts to spark earnest conversation.

The goal I want to achieve with this is to take the most expensive and historic NFT, and show that if it is not protected, how can we guarantee that any NFT is safe from intentional malice, fraud, forgeries, theft, etc.?” he wrote.

Although the sleepminting saga is hairier than a Haight-Ashbury commune, I think we can chop through the overgrowth using two questions with serious stakes for different participants in the NFT market. 

Screen grab of the NFTheft website showing details of the "sleepminted" token.

Screen grab of the NFTheft website showing details of the “sleepminted” token.

1. What does sleepminting tell us about the technological vulnerabilities of art-related NFTs?


Short Answer

The main smart contract driving the market might not be smart enough to secure the frenzied level of buying and selling we’ve seen in 2021.


Longer Answer

What’s clear is that Personne is exploiting a flaw in the standard ERC721 smart contract, which is used by the overwhelming majority of art-related NFTs transacting on the Ethereum blockchain. But it is not an easy-to-see flaw, and the effect is not being faked by Photoshop wizardry or some other non-crypto chicanery; the sleepminted Beeple really is minted in Beeple’s wallet, it really is transferred elsewhere afterwardand both of those transactions are memorialized forever on the blockchain. 

How, exactly, is Personne doing this at the level of code? He declined to elaborate, saying only that he would publicly reveal the details before initiating the next stage of the NFTheft project. Other crypto-fluent folks I talked to needed more time to investigate than my deadline would allow. But Personne revealed in one tweet that he had deployed a “custom-built” contract that did not have an unnamed ERC721 “security check in place,” allowing him to move the token from wallet to wallet without meeting the typical conditions (for instance, a buyer sending funds to meet a set sales price).

Good luck identifying the flaw, though. Kevin McCoy, the creator of the first NFT, tried running Personne’s sleepminting smart contract through a decompiler to get more insight into the source code. His highly technical, highly candid snap take on the results was that they were “fucking crazy” with “all kinds of shit going on,” but he could not decipher the actual function responsible for the mischief.

What McCoy could detect was that Personne’s customization was substantially larger and more expensive to deploy than a typical ERC721. The sleepminting contract consists of around 4,000 lines of code and cost 1.04 ETH, or about $2,500, in gas fees—roughly 12.5 times as much as it would usually cost to mint an average ERC721 token, if not more. (“Gas fees” are the term of art for the expenses charged to conduct a transaction on the Ethereum blockchain, with the price changing based on the network’s available computational resources.)

A courtroom sketch of Domenico De Sole on the witness stand with the fake Rothko painting he bought from Knoedler gallery. His case, which was separate from the one that jus settled, was the only one to go to trial. Photo: Elizabeth Williams, courtesy Illustrated Courtroom.

A courtroom sketch of Domenico De Sole on the witness stand with the fake Rothko painting he bought from Knoedler gallery. Photo: Elizabeth Williams, courtesy Illustrated Courtroom.

Why It Matters

Sleepminting is likely more sophisticated than the average NFT buyer’s understanding of the technology, making those buyers unlikely to question what appears to be blockchain-verified authorship.

This is especially important because we’re in a market frenzy for NFTs right now. Thorough vetting falls by the wayside whenever under-informed buyers flood into a largely unregulated space. Fraudsters have made millions in the past selling fake Jackson Pollocks on eBay, and the Knoedler forgery scandal proved that even knowledgeable collectors can be susceptible to high-level chicanery.  

I can’t rule out that a savvy crypto-collector might be able to detect a giveaway in either a sleepminting contract or its data trail. It’s also true that, even without Personne publicizing what he’d done, market players could use off-chain research to find out whether Beeple actually minted a second edition of Everydays—just as, say, Warhol collectors could consult the catalogue raisonné to make sure a particular Marilyn canvas is regarded as authentic.

Still, if bad actors began exploiting vulnerabilities in ERC721 contracts, it could theoretically plunge the NFT market into a forgery crisis on par with the antiquities market, where recent research showed that up to 80 percent of what is offered online is likely either looted or fake. 

Incidentally, Personne alleges that 80 percent of the NFTs on the market are “invalid and need to be redone” because of their vulnerability to sleepminting. That’s a difficult estimate to corroborate. But even if he’s overshooting by two or three times, the financial exposure would swell to millions of dollars in art-related NFTs alone. Isn’t that a prospect worth investigating?

A courtroom setup awaiting a witness. Photo: Friso Gentsch/dpa (Photo by Friso Gentsch/picture alliance via Getty Images)

A courtroom setup awaiting a witness. Photo: Friso Gentsch/dpa (Photo by Friso Gentsch/picture alliance via Getty Images)

2. Does sleepminting violate any U.S. laws? 


Short Answer

The legal exposures are murky and hard to act on, but they exist. In a way, that’s the point.


Longer Answer

At present, NFTs still occupy a legal gray zone. As of my writing, multiple cases pending in the U.S. could influence their ultimate classification. What’s unclear is how much immunity a sleepminter would have based on the lingering ambiguity.

Personne told me that, after being “thoroughly consulted and advised by personal lawyers and specialist law firms,” he is confident there are “little to no legal repercussions for sleepminting.” His argument is that ERC721 smart contracts only contain a link pointing to a JSON (Javascript Object Notation) file, which in turn points to a “publicly available and hosted digital asset file”here, Beeple’s Everydays image. (Remember, the NFT is almost never the artwork itself.)

He likened the idea of suing him to the “absurd” prospect of Apple suing “every single pedestrian for viewing or photographing their billboard in Times Square.” 

But multiple prominent art attorneys I spoke to felt Personne is standing on shakier legal ground. “If the hacker is not trying to pass the sleepminted work off as authentic and charging money for it, then he is probably not in any danger of being charged with criminal fraud,” said Steven Schindler. “If he were to be misrepresenting the nature of the NFT, and selling the works under false pretenses, then he would certainly be open to charges of fraud.”

But fraud isn’t the only issue at play here. Let’s return to Personne’s contention that the token merely points to a publicly viewable digital file. Querying the blockchain seems to show that the original Everydays NFT and Personne’s sleepminted “second edition” have two different URIs—essentially, the alphanumeric code identifying the actual image file that the token grants ownership to. This implies he downloaded the original file and re-uploaded it to a different online location. 

Further, it looks like he did so without making any changes to the work that could be positioned as “transformative,” like, say, Richard Prince cropping out the Marlboro ad copy in his Cowboys” photographs, or adding nonsensical comments to other people’s Instagram selfies in his New Portraits” series. (Two copyright infringement cases on the latter are currently pending in the Southern District of New York.)

Richard Prince. Photo: Patrick McMullan

So even though the sleepminted token is not the artwork, it still needs to point to the artwork in order to mean anything. If Personne made this happen by reuploading an unaltered digital copy of Beeple’s Everydays, as the URI suggests, then that could very well still qualify as unauthorized reproduction of an artwork whose copyright Beeple still owns.

In short, it’s possible a court could find him liable to be “in violation of Beeple’s exclusive right to publicly display his work,” according to Megan Noh, co-chair of art law at Pryor Cashman.

Personne may also be running afoul of what’s known as the Lanham Act, specifically a clause known as “false designation of origin.” Remember, the entire point of sleepminting is that its unauthorized attribution to Beeple appears legitimate on the blockchain. These claims are reasserted in the details of the sleepminted token on the NFTheft website (“Creator: Beeple (b. 1981)”) as well as the listings on Rarible and Opensea. 

The ‘statements’ on the website and/or created by the intentionally-manipulated metadata feel a lot like ‘false designations of origin,’ which could give rise to liability,” Noh said. “But there’s also an interesting question about whether an NFT can be considered a ‘good or service,’ which it would need to be for this area of the law to apply.”

Screen grab of the Rarible listing for the sleepminted token, showing the current owner as Arsene Lupin and the creator as Beeple.

Screen grab of the Rarible listing for the sleepminted token, showing the current owner as Arsene Lupin and the creator as Beeple.

Why It Matters

Personne’s copious public proclamations that the sleepminted NFT was not, in fact, authorized by Beeple may not protect him in a U.S. court—precisely because he engineered the blockchain to say otherwise. If a sleepminted token truly made it out “in the wild,” as Personne told me it did, then his exposure could only increase as the token moved through the secondary market to buyers who may be less aware of the NFTheft site, his social media presence, and any other links back to his white-hat rhetoric. 

That said, anyone who wanted to sue Personne would likely first have to untangle his identity, since it’s not easy to bring a pseudonymous party to court. Again, good luck.

Incidentally, this is one of the reasons it still seems unlikely to me that Lupin, the pseudonymous owner of the sleepminted NFT, is anyone other than the same person behind… uh, Personne. The best way to protect yourself from misunderstandings by subsequent owners is to ensure there are never actually any subsequent owners. 

Debating the legality of this particular episode misses the larger point, though. 

The NFTheft project aims to show that a gigantic proportion of the art NFT market is vulnerable to such malicious intent because of a structural flaw in the standard smart contract. If Personne were a bad actor, he could have sleepminted a much less famous NFT, kept quiet about his custom smart contract, and started selling directly to the most naive buyers he could find. That real people could be tricked into losing real money, and that anyone undertaking the ruse could plausibly be found liable for damages, reinforce why Personne’s gambit is worth our attention. 

We have already seen sophisticated hacks siphon tens, even hundreds, of millions of dollars out of cryptocurrency exchanges, decentralized financial entities, and blockchain-based “smart” organizations. Maybe it was only a matter of time before someone figured out a way to do the same to the part of the NFT marketplace that relies on ERC721 contracts. The question is whether the biggest and most influential players will take action before the black hats dig in.



That’s all for this week. ‘Til next time, remember what Upton Sinclar said: It is difficult to get someone to understand something when their salary depends on them not understanding it.

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