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Yup. This smells (no pun intended) of money laundering to me. Any auction for an obscurely collectible item is perfect for money laundering, since there’s a hug

Yup. This smells (no pun intended) of money laundering to me. Any auction for an obscurely collectible item is perfect for money laundering, since there’s a huge amount of plausible deniability in someone’s honest willingness to pay such an exorbitant sum. More concretely, let’s say Joe Criminal has $1.56MM in ill-gotten gains. He proceeds to sell an obscurely collectible item in his possession at auction. Via a shell company/individual, he anonymously bids it up to $1.56MM, and pockets the money minus any auctioneer fees. As long as the authorities don’t investigate the identity of this anonymous bidder, Joe Criminal has successfully laundered his $1.56MM. And as long as the authorities think that some crazy collector truly believes that an original Mario 64 cartridge is worth $1.56MM (as would also be the case for other obscure collectibles), it’s unlikely this particular transaction will raise their eyebrows. It’s not like there’s an army of appraisers out there who could fairly value this cartridge.

crazygringo 5y ago
> it’s unlikely this particular transaction will raise their eyebrows Considering it's national news, would they really not investigate it? It seems waaaaay too conspicuous and high-profile to be an attempt at money laundering. And from what I understand, auction houses are now required to file a 1099-K with the IRS so that the seller can't hide from taxes, or hide their identity. So even without the news, something tells me that filing capital gains tax on a ~3,000,000% return for a video game cartridge is going to flag a little bit of suspicion... ;)
- rasz 5y ago
  Its bigger than some random money laundering. "This morning on 7/14/21, PSA-grading parent company Collectors Universe just acquired Wata Games. The timing is anything but coincidental after the gigantic Heritage Auctions activities this past weekend." https://www.youtube.com/watch?v=7ARoutGa4vQ https://www.youtube.com/watch?v=7ARoutGa4vQ
  - MontyCarloHall 5y ago
    Also entirely possible that it’s a pump-and-dump scheme to inflate the prices of old videogames. I think we both agree that the buyer and seller are the same entity.
- MontyCarloHall 5y ago
  Money laundering is not the same as tax evasion. The seller doesn’t care about hiding from taxes; he cares about hiding the true source of his illegal income. If anything, paying taxes on laundered money makes it look more legit. The only party who needs to hide their identity here is the buyer, since unmasking them would reveal that no money actually changed hands. As far as the seller’s concerned, he wants to appear as if he earned $1.56MM of legitimate taxable income selling an old N64 cartridge to some crazy anonymous buyer.
  - crazygringo 5y ago
    Right, but the seller (who the IRS knows about) is the one who can clearly be suspected of being part of the laundering. The IRS refers signs of money laundering to the relevant investigative agency, whether when a car wash mysteriously multiplies its earnings by 50x all in cash transactions, or when somebody suddenly gets mega-gigantic super-super-suspect capital gains. The relevant agency is going to ask the auction house who the buyer was, the auction house is going to comply, they'll trace shell companies as needed, end of story. It's not anonymous once the police/feds start investigating. Money laundering is successful when it stays hidden among seemingly normal transactions. Not when it sets splashy newsworthy records.
rasz 5y ago
>obscure collectibles "bestselling Nintendo 64 game, with more than eleven million copies sold by 2003" >army of appraisers out there who could fairly value this cartridge Cartridge is worth between 10 and 40 dollars and can be bought in every single retro gaming shop on planet earth due to manufacturing numbers and popularity. All the "value" is in the cellophane shrink wrap and magical Grading, highest ever despite this particular box having crushed corners. Its almost like the price had no connection to actual item being sold.
- MontyCarloHall 5y ago
  By “obscure collectible,” I meant something that most people generally don’t consider to be a collectible, not that the item itself is obscure. This makes it harder to fairly value it (great for money laundering), since there just isn’t any appraisal market for the item.
- psychomugs 5y ago
  There was no cartridge, no game, just a hollow simulacrum of “Super Mario 64” foggily formed by the hype surrounding it. See also the $18k invisible sculpture: https://news.artnet.com/art-world/italian-artist-auctioned-off-invisible-sculpture-18300-literally-made-nothing-1976181 https://news.artnet.com/art-world/italian-artist-auctioned-o...
- mrcode007 5y ago
  I’m surprised nobody raised the issue of re-wrapping opened boxes…
jldugger 5y ago
IDK how this works. Are these auctions settled in cash, with no link to the banking sector? Wouldn't the _buyer_ be automatically suspect? It feels like the more likely play would be just plain old fraud. With an accomplice, shill bid your item from 200 bucks to 1.56 million, and hope someone else decides that auction was legit enough to buy off you; even if it comes in 10 below previous auction, it's a coup. Or if it is stolen or damaged in a fire, insurance would be able to help make you whole.
- alexeldeib 5y ago
  While I agree with you on the practical difficulties, the reason it's so clever is right in OP's comment: "there’s a huge amount of plausible deniability in someone’s honest willingness to pay such an exorbitant sum." That rings true for me -- think of any collectible and the prices people are willing to pay. At the extreme: large sums for things most people find totally irrational. Who are you to tell a high bidder that you don't believe they are genuinely interested, when you know nothing about them other than the bid?
  - jldugger 5y ago
    Technically, you'd need two bidders if this is an open auction, or you'd also have to explain why you outbid second place by so much. And to answer my own question: apparently it's not required for auction houses to vet buyers, and this has been discovered by russian oligarchs evading US sanctions. Congress passed a law on Jan 1 to make that illegal -- overriding Trump's veto, naturally. It specifically mentioned 'antiquities' so presumably people are testing the waters elsewhere.
    - antihipocrat 5y ago
      I was confused as to how the buyer would escape scrutiny as well.. So the answer is that if the buyer isn't vetted, then the seller could pretend to be multiple buyers and bid up the price to the desired amount. The settlement would then be made (or at least documented as being made) in cash.
- 5y ago
deleted 5y ago
[deleted]
boringg 5y ago
Money laundering or also moving money out of countries with strict capital controls
setr 5y ago
It seems to me any reasonable money launderer would strive not to bring attention to himself, by outbidding the market value by such an extreme. You’d rather just do multiple transactions, maybe 20% above real value (which would further avoid vetting, by being a standard player in that market)

crazygringo 5y ago

> it’s unlikely this particular transaction will raise their eyebrows Considering it's national news, would they really not investigate it? It seems waaaaay too conspicuous and high-profile to be an attempt at money laundering. And from what I understand, auction houses are now required to file a 1099-K with the IRS so that the seller can't hide from taxes, or hide their identity. So even without the news, something tells me that filing capital gains tax on a ~3,000,000% return for a video game cartridge is going to flag a little bit of suspicion... ;)

rasz 5y ago
Its bigger than some random money laundering. "This morning on 7/14/21, PSA-grading parent company Collectors Universe just acquired Wata Games. The timing is anything but coincidental after the gigantic Heritage Auctions activities this past weekend." https://www.youtube.com/watch?v=7ARoutGa4vQ https://www.youtube.com/watch?v=7ARoutGa4vQ
- MontyCarloHall 5y ago
  Also entirely possible that it’s a pump-and-dump scheme to inflate the prices of old videogames. I think we both agree that the buyer and seller are the same entity.
MontyCarloHall 5y ago
Money laundering is not the same as tax evasion. The seller doesn’t care about hiding from taxes; he cares about hiding the true source of his illegal income. If anything, paying taxes on laundered money makes it look more legit. The only party who needs to hide their identity here is the buyer, since unmasking them would reveal that no money actually changed hands. As far as the seller’s concerned, he wants to appear as if he earned $1.56MM of legitimate taxable income selling an old N64 cartridge to some crazy anonymous buyer.
- crazygringo 5y ago
  Right, but the seller (who the IRS knows about) is the one who can clearly be suspected of being part of the laundering. The IRS refers signs of money laundering to the relevant investigative agency, whether when a car wash mysteriously multiplies its earnings by 50x all in cash transactions, or when somebody suddenly gets mega-gigantic super-super-suspect capital gains. The relevant agency is going to ask the auction house who the buyer was, the auction house is going to comply, they'll trace shell companies as needed, end of story. It's not anonymous once the police/feds start investigating. Money laundering is successful when it stays hidden among seemingly normal transactions. Not when it sets splashy newsworthy records.

rasz 5y ago

>obscure collectibles "bestselling Nintendo 64 game, with more than eleven million copies sold by 2003" >army of appraisers out there who could fairly value this cartridge Cartridge is worth between 10 and 40 dollars and can be bought in every single retro gaming shop on planet earth due to manufacturing numbers and popularity. All the "value" is in the cellophane shrink wrap and magical Grading, highest ever despite this particular box having crushed corners. Its almost like the price had no connection to actual item being sold.

MontyCarloHall 5y ago
By “obscure collectible,” I meant something that most people generally don’t consider to be a collectible, not that the item itself is obscure. This makes it harder to fairly value it (great for money laundering), since there just isn’t any appraisal market for the item.
psychomugs 5y ago
There was no cartridge, no game, just a hollow simulacrum of “Super Mario 64” foggily formed by the hype surrounding it. See also the $18k invisible sculpture: https://news.artnet.com/art-world/italian-artist-auctioned-off-invisible-sculpture-18300-literally-made-nothing-1976181 https://news.artnet.com/art-world/italian-artist-auctioned-o...
mrcode007 5y ago
I’m surprised nobody raised the issue of re-wrapping opened boxes…

jldugger 5y ago

IDK how this works. Are these auctions settled in cash, with no link to the banking sector? Wouldn't the _buyer_ be automatically suspect? It feels like the more likely play would be just plain old fraud. With an accomplice, shill bid your item from 200 bucks to 1.56 million, and hope someone else decides that auction was legit enough to buy off you; even if it comes in 10 below previous auction, it's a coup. Or if it is stolen or damaged in a fire, insurance would be able to help make you whole.

alexeldeib 5y ago
While I agree with you on the practical difficulties, the reason it's so clever is right in OP's comment: "there’s a huge amount of plausible deniability in someone’s honest willingness to pay such an exorbitant sum." That rings true for me -- think of any collectible and the prices people are willing to pay. At the extreme: large sums for things most people find totally irrational. Who are you to tell a high bidder that you don't believe they are genuinely interested, when you know nothing about them other than the bid?
- jldugger 5y ago
  Technically, you'd need two bidders if this is an open auction, or you'd also have to explain why you outbid second place by so much. And to answer my own question: apparently it's not required for auction houses to vet buyers, and this has been discovered by russian oligarchs evading US sanctions. Congress passed a law on Jan 1 to make that illegal -- overriding Trump's veto, naturally. It specifically mentioned 'antiquities' so presumably people are testing the waters elsewhere.
  - antihipocrat 5y ago
    I was confused as to how the buyer would escape scrutiny as well.. So the answer is that if the buyer isn't vetted, then the seller could pretend to be multiple buyers and bid up the price to the desired amount. The settlement would then be made (or at least documented as being made) in cash.
5y ago

deleted 5y ago

[deleted]

boringg 5y ago

Money laundering or also moving money out of countries with strict capital controls

setr 5y ago

It seems to me any reasonable money launderer would strive not to bring attention to himself, by outbidding the market value by such an extreme. You’d rather just do multiple transactions, maybe 20% above real value (which would further avoid vetting, by being a standard player in that market)