Pricey collectibles such as art, wine and classic cars are high on the shopping lists of the ultra-affluent—and fraudsters are only too happy to provide them.
Collectibles crime is a global industry that generates billions annually. The recent run-up in prices at international auction sales and the ease with which collectibles are transported across borders have fueled a burgeoning market for forgeries. Forty percent or more of the collectibles sold worldwide are likely counterfeit, experts estimate.

“That’s a frightening statistic,” says art historian and provenance research expert Jane C.H. Jacob, president of Chicago-based Jacob Fine Art.

Jacob thinks the number of forgeries, especially counterfeit fine art paintings, is increasing because of the growth in global wealth and disposable income. “There’s more money being spent in the collectibles market than ever before in history. Where there’s money, there’s crime,” she says.

Recent examples of high-profile collectibles forgeries include those involving Knoedler & Company, one of New York’s oldest private galleries until it closed in 2011. Knoedler sold over $60 million worth of forged paintings that were passed off as masterpieces by artists such as Jackson Pollock, Mark Rothko and Robert Motherwell. The unsuspecting buyers included hedge fund managers and CEOs. In another prominent scam, celebrity wine dealer Rudy Kurniawan was convicted in December of mixing cheap wines in his kitchen to mimic the taste of pricier wines and making millions selling it to wealthy collectors, including billionaire William Koch.

According to a 2012 survey by Barclays, the rich collect primarily for the emotional gratification of owning one-of-a-kind pieces. Yet they increasingly view their treasures as a store of wealth and a source of capital growth. The survey Profit or Pleasure? Exploring the Motivations Behind Treasure Trends found that wealthy individuals have an average of 9.6% of their wealth in 10 different kinds of collectibles, including paintings and pictures, sculptures, tapestries and rugs, antique furniture, jewelry, classic cars, wine, stamps, coins and precious metals.

Fortunes And Forgeries
The recent run-up in prices for some collectibles has been staggering. In The Wealth Report 2014, London-based real estate brokerage Knight Frank said its Luxury Investment Index of major collectibles grew 179% over the 10 years ending with the third quarter of 2013, a compound annual growth rate of 10.8%. All nine categories in the index rose in value, except collectible furniture, which was down 19%. Vintage cars performed best, soaring 456% over the 10-year period, followed by stamps, coins, art, wine and jewelry, which rose 250%, 227%, 193%, 176% and 156%, respectively.

High-end collectibles may be excellent long-term investments, but they carry risks. They’re relatively illiquid and notoriously difficult to value. Their returns can be volatile, and they’re subject to the whims of changing artistic tastes, as well as fads and bubbles.

Yet the most significant investment risk may very well be the increasing likelihood of buying a forgery. The market for collectibles, including fine art, is the largest unregulated market in the world.