The general thought is that like Higher end Art, it's a form of Laundering / Tax evasion that's now running rampant in the Console Gaming side of the house.

It's rather sad, now a lot of classics are being ridiculously priced at used game stores and while i'm all for making money, some of the recents i've seen have been insane price gouges. I saw Panzer Dragoon for Saturn going for 3800 at a used game shop, it was not complete either. I bought a fully complete in box copy for like $380 a couple years back and That was pricey to me.

$380 for complete and good condition does sound a bit pricey, but it's within the realm of "I have this and I'm willing to wait for a buyer who wants it badly enough". $3800 is insane. I myself own a couple rare-ish games (none sealed, I bought them to play them), and if they got up that high I'd sell them in a heartbeat. I have a satiator, I don't need a CIB Saturn Bomberman.

Exactly, I like owning a few of my favorites. I do have a complete US Dreamcast collection and the vast majority are Sealed. I started snagging them up as soon as the console "failed".

I hadn't even noticed the Satiator was out finally! Thanks for dropping the reminder. There goes $250 lol.

How does one launder money / evade taxes with high end art?

My naive understanding is it’s a way of transferring money in return for something supposedly valuable. That might really be payment for something else.

Then why would they do it so visibly when they could use quiet assets? IMO that doesnt make sense

1. Buy for $x

2. Get appraised for $100x

3. Donate

4. Take $100x tax deduction

That doesn't work. That's the great myth of donation tax dodging that isn't actually true, yet is endlessly repeated. You ultimately - at best - only save a fraction of your donated value, you'd be better off just selling the asset instead of donating it for a fractional tax saving.

If that actually worked the top 10% wouldn't be carrying such an outsized share of the nation's tax burden on its shoulders via our very progressive tax system, they'd all be busy dodging all of their taxes via donations.

If you really wanted to avoid taxes, you wouldn't donate anything, you wouldn't sell anything.

The single best way to avoid taxes in your lifetime, is to borrow against your assets and only repay the borrowing in death. Your cost will be interest (interest rates are ridiculously low today). You could go much of your lifetime without paying taxes, while enjoying the good life borrowing against eg your stock holdings. Warren Buffett has made this point numerous times, that if he wanted to avoid paying taxes during his lifetime while enjoying his immense wealth, he'd just use that approach. Buffett could have taken out a $1 billion loan 30 years ago, had fun with that cash, and paid zero taxes on it for decades (while also not selling his primary asset - Berkshire Hathaway stock - which has appreciated dramatically).

A fraction of the donated value is still much bigger than the actual value you paid for the art. The important part is to get an appraisal far above the actual value.

How does one get an appraisal that the IRS will believe?

The IRS is way understaffed. I imagine they aren't looking too hard.

If you are reporting hundreds of k in donations I'm almost certain you are getting audited, even if it takes them a few years to begin it

> you'd be better off just selling the asset instead of donating it for a fractional tax saving.

The idea of this scheme (which may be exaggerated on the internet) is that you cannot sell the asset.

This is a painting by the cousin of someone who went to the same barbershop as de Kooning. There is zero market. There are approximately zero buyers. There is some story to be constructed that plausibly justifies some "historical value." There is presumably some decorative value.

I keep seeing this discussed, but I have honestly had difficulty getting relatively large loans against assets. All they seemed to care about was income. Yes, Buffet definitely has a better relationship with the bank than I, but I wonder if this is really possible to copy by the average person.

Doesn’t the tax deduction only apply for 30% of the donation though?

100x * .30 = 3x value in deductions. You can scale the 100x accordingly to your needs.

Isn't it a scheme where you sell to yourself and then claim illegal money is money you earned from the sale ?

This is the exact question ("how?") I always ask when someone parrots "tax evasion" and the answers I get back never make any sense, at all.

And it's always from a bunch of armchair "tax dodgers" that, judging from the fantasies they share, have never seen an IRS form in their lives.

Your assumption is it's only US tax evasion. It's also about getting money out of other countries and evading their taxes, creating values of wealth store. Much like the real estate industry in key markets of the US, foreign investors don't care about paying more if it means they can safely get their cash out of host countries.

1031 Exchanges are one method, buying overpriced items to bring illicit cash into legitimate ownership is another. There are a myriad of ways to make it beneficial. I think we all can agree though that the price is nuts.

Then again The H.Biden paintings are listed for 75 - 500,000 so maybe I just have 0 clue about what super wealthy people want.

>buying overpriced items to bring illicit cash into legitimate ownership is another

No, Christie's (or some other big auction house) is never going to take your money that way. No one, actually.

It's the same with real estate. "Just walk in with a million in $20 bills and pay the property with cash". That's not going to happen. Ever.

Never ever?

You’d think so, and yet it’s come to light Crown Casino in Melbourne was doing just that, knowingly maintaining relationships with known crime organisations, and was actively enabling money laundering.[1]

I argue politics and big business is a front for bad behaviour, as evidenced by the endless stream of corruption news pouring out of the Australian federal government.

I find it difficult to believe the the other G20 nations[2] are markedly better.

1. https://www.smh.com.au/business/companies/five-bombshells-th...

2. https://en.m.wikipedia.org/wiki/G20

That's a casino, you expect cash to be there. And they're being busted ... so there goes your super laundering operation.

You will never buy property and pay for it in cash (in developed countries, obviously).

You’d think so, but I actually know a drug dealer who did just that not so long ago.

Cash deposits above $10,000 in Australia are mandatorily reported, that doesn’t mean every cash deposit above $10,000 is investigated.

Wait, so your friend (or acquaintance?), bought an apartment in cash? Or does he regularly makes cash deposits below $10k?

Please clarify because those two things are THREE orders of magnitude apart.

Buying an apartment with a briefcase full of money is something you see only on Disney movies.

Small businesses regularly make $20-30k deposits in cash. That represents the weekly cash revenue of a successful McDonald's franchise. You can slip an extra $1-5k in there, weekly - If you do your accounting "right", it looks like you're moving a little more product than you actually are, and is virtually indistinguishable from real business. See Walter White buying a Car Wash in Breaking Bad. You need a bit of scale: 5 or 10 locations to make it really work, but it does work.

I know, but that's still far from making a $1M+-or-so operation with a bunch of cash.

That's the whole point, you just can't drop that much gray money on something at once.

Purchase a property with AU$150,000 in cash, literally a briefcase full of cash.

So, he’d have handed that money to the vendor.

Wow, amazing. I stand corrected then, but I don't think you could pull that off on this side of the world.

I think you drastically under estimate how much dodgy shit goes on all around us all the time.

There is but a thin veneer of righteousness barely covering a small fraction of the lands.

I believe it's more like: here's 1.5 million dollars that you can use to explain to the IRS how you're paying for a new house. If you give me 2 million in illicit cash, I can use that elsewhere and the IRS doesn't care because I already have 100 million dollars in assets.

>IRS doesn't care because I already have 100 million dollars in assets

Again, that won't happen, ever. The IRS is not going to just forget those 2 million, they don't care if it's "pocket change" for you or not.

Also, you are implying that somebody with 100M+ in assets is going to compromise everything to launder 2 million from some other stranger ...

What if the buyer is from outside US - say a foreign oligarch or dictator? I find it hard they refuse to sell to such people altogether, esp. seeing how much real estate in London is being bought by Russian kleptocrats.

The smart way to launder money is to create a company that "rates and pays" stuff like your electric bill then vastly overcharges you to do it.

There is a place you can do this. Casinos.

There's apparently been an incredible amount of money laundering going through casinos in Vancouver.

This completely justifies emulation/flash carts/ODEs in my mind.

They're really great. You can play games on original hardware without having to worry about wearing out moving components or the availability (and therefore affordability) of any given title.

Some people balk at the satiator's ~$250 price tag, but I own individual Saturn games you can't even buy with that.

I read an interesting explanation on reddit somewhere that posited this is the result of a small group of devoted enthusiasts basically wash trading: They sell the games to each other back and forth for extremely high prices to make it seem like there's an insane amount of demand for them, in order to make that a self-fulling prophecy.

Whether that's true or not I have no idea, but it's certainly plausible.

They don’t even necessarily have to be coordinated.

If you’re operating a business that profits from selling collector items, you benefit from headlines about high sale prices. Spending $1.5 million to juice the market and generate excitement could manufacture enough demand and trade volume through follow-on buying frenzies that you come out ahead in volume sales of cheaper items.

Then you’re still sitting on an asset “worth” $1.5m that you can use to play games with taxes (depreciation?) and also use as collateral to secure cheap loans.

These game prices are no more absurd than a Mickey Mantle card being worth $20-$30 million (1952 Topps Mantle #311 PSA 9 sold for $5 million not long ago; there are three superior PSA 10 copies which in theory should be worth a lot more, two of which are owned by a billionaire).

Consider the global scale and love of video games, Mario, Zelda, etc. Versus the localized scale of Major League Baseball (even if it's in the largest economy) and particularly Mickey Mantle.

So why not Mario if Mantle? It makes just as much sense (however much sense that is, granted).

Check out what new prospects go for in the baseball card world. A Wander Franco card went for $200,000. This is a 20 year old that has barely played any professional baseball, recently got called up with the Tampa Rays, and hasn't hit well so far (and may just end up as a flop, as these guys sometimes do).

So Wander Franco cards make sense, and Mario doesn't? Obviously all of it seems crazy. And yet there it is.

You know what else is really crazy? Tesla's valuation. Shopify's valuation. Snowflake's valuation. DocuSign's valuation. And so on.

Yeah, I know, those are real companies that have products and services. Ok. I posit that many of those valuations are less sustainable than a 1952 Mickey Mantle card at $5m. And we're not talking a million dollars, we're talking trillions of dollars of laughably over-inflated valuations in the stock market. Mario at $1.5m is not crazier than Tesla at $600-$800 billion.

It's all part of the same asset speculation mania.

Millions of people out there are paying obscene prices for stocks and it won't end well. And with stocks it's not just some rich person with a toy hobby (because who really cares what that person burns their money on), it's retirement funds, pensions. All loaded up on Coca Cola at 33 times earnings, for a company that hasn't seen any growth in five years, has mediocre prospects for growth, and deserves half their present valuation at best (now repeat that scenario for most of the garbage-valuation blue chips, like McDonald's or Starbucks; check out the valuation on WD-40 (WDFC), an old slow-growth degreaser/lubricant spray company sporting a 40-45 PE; the entire market is like that now, out of its collective mind).

These are the consequences of perpetually low interest rates, it has bred a rabid culture of speculation and desperation for any yield or return.

I think the reason for the speculation it’s wash trading is that unlike the 1952 Mickey Mantle card, there are presumably a lot more Mario 64 cartridges in circulation and thus the auction price seems out of line for the supply available.

Doing a cursory google search, I can see most used cartridges going for ~$25-40. Is an unopened cartridge worth many more orders of magnitude? Possibly, but it at least raises a lot of eyebrows that there’s something else at play.

EDIT: An analogous collectible is probably more something like a black lotus card, which as far as I can tell has “only” procured 500K at auction for a flawless one, and as far as I can tell inferior versions cost an order of magnitude less (10K or so) but nothing near to the spread here.

> I can see most used cartridges going for ~$25-40. Is an unopened cartridge worth many more orders of magnitude? Possibly, but it at least raises a lot of eyebrows that there’s something else at play.

Yes, that's exactly how it works. The unopened package in near perfect condition is considered extraordinarily scarce.

It's the scarcity factor via grading that is being applied. That's obviously a graded Mario 64 package, not just a stray cartridge (of which there are zillions of copies as you note).

The supply, in the collectible world, is thus considered to be exceptionally low. You're talking about a sealed box, top notch grade. There are only a small number of those still in existence.

Here is the image of the graded Mario game:

https://ichef.bbci.co.uk/news/976/cpsprodpb/12EF3/production...

It's a 9.8, which is a very high grade for a vintage video game box. As far as the collectors are concerned, that's a very scarce item. The value is in the condition of the box and that it's sealed. Without that, you could just buy the item on eBay for ~$30-$50.

You see the exact same outcome in the comics world, for graded comics. And it's identical to the quality + grading = scarcity aspect in baseball / basketball / pokemon cards.

1969 is Mickey Mantle's last year for Topps baseball cards. There are a lot of copies of that card in existence, relatively speaking. You can buy it ungraded for $100-$1,000 depending on the condition you want. If you want a PSA 10 of that card (there are only two)? Be ready to pay $500,000+. That's the same exact scarcity by grading mechanism in action as with the 9.8 graded Mario cartridge, it's because there are not very many of them in that condition.

Would there be anyway to buy a low grade cartridge and repackage it in to look like a high grade $1.5M one?

Asking for a friend.

Interesting! TIL.

> These are the consequences of perpetually low interest rates, it has bred a rabid culture of speculation and desperation for any yield or return.

If and when the Fed starts raising rates, valuation on growth stocks (and others too) will come back down to earth. 0% FFR and virtually unlimited Fed support almost do justify some of the current valuations, at this specific moment in time. The Fed could change that though.

Most collectors of old games do not understand why it was sold that much. Super Mario 64 in mint condition and wrapped is rare, but clearly not often to justify this price.

One thing I've noticed though if that people buying a auctions do not always seem aware of the actual prices on the market. I attended an auction recently and bought nothing, as all people in the community I know. Everything was sold for far too mych. We were laughing about it, wondering why people were buying those games at those prices, as we know we could easily get them for far less.

I'd be really interested to know more about the dynamics making people spending far too much money like that (misinformation? excitation during the auction?).

> A high rating is not enough to guarantee a high auction price - although it helps. Another copy of Super Mario 64 in the same auction with a 9.6 A++ rating sold for a comparatively affordable $13,200

This seems to reinforce some kind of laundering/tax evasion scenario. There is little logical reason for one cartridge to go for $13K and another to go for $1.5mm when both are certified excellent condition. It appears that the one going for far more is a product of timing. Someone needed to move a large chunk of money quickly and decided on the Mario cartridge.

If the normal buyers are only willing to pay $13k I don't see how it makes sense to pay $1.5 million to launder money. That's a big loss you'll have to take.

The seller is a co-conspirator? The loss is only the auction house fee in that case.

But if you use dirty money to buy a good, it doesn't magically turn into clean money. A possible scenario could be where the buyer has clean money and wants to pay the seller for services by bidding way too much for a rare game. It doesn't make too much sense though because now your transaction is under scrutiny by the entire world?

Hiding in plain sight! The perfect plan!

Not when you have bazillions of ways to do that without being in plain sight. NFTs seem to better fit this need, and even then I don't get why people always assume it has to do with black money

That's hundreds of thousands of dollar to pay in fees.

There is no fundamental difference between a very rare old vase, car or game.

Someone living in 1950 would also think is crazy to pay 1 million for a 1940 car.

Someone living in ancient China would also think it's crazy to pay a lot of money for a cooking pot.

People are realizing this, and are basically front-running the market, so the price of future priceless artifacts are rising much sooner.

This is the answer I fundamentally agree with on this subject. Super Mario 64 for N64 is a part of humanity's cultural and history, and the supply of similar items will only decrease over time. The expected value is possible for several lifetimes from now though, and most rich families struggle to hold onto it forever.

I agree the software is part of humanity's cultural history but the physical artifact of the cartridge is nearly worthless. We could literally mass produce Mario 64 cartridges to exact specifications if we wanted to. You can buy reproduction carts on the internet, cheap. We can't recreate ancient works of art or antique machinery, those are truly unique, easily but Nintendo cartridges are just chips and plastic.

It is very convenient, for many reasons, if you can call a $1.5m transfer “a sale”. If you can support said price with an auction so the price is supported by a fair market, even better.

Legally transferring that much money to another person (and minimizing taxes) is difficult. Art and collectible sales are a convenient escape hatch.

Money laundering is definitely involved in the fine art market but the explanation here is more banal. It's the same thing driving absurd NFT prices: Quantitative Easing policies by the fed have dumped a shitton of money into the equities markets and some people have cash to burn and nowhere to put it. The nasdaq is up almost 200% in 5 years. What do you do with all this extra cash? There's only so much you can spend on luxuries for yourself. For the rest, why not put some into speculative assets which give the small chance of very high returns (crypto, startups, and, apparently, N64 carts).

>someone has $1.5M to throw away on something like this

Your reaction seems pretty normal and all, but your ethical viewpoint seems backwards to me.

If they spent $1.5M on something that involved the amount of labor and resources that normally buys, then they threw it away, if it wasn't for the general good. A yacht for instance.

But if they spent $1.5M on a collectible with no real use, then they have just exchanged a coupon, basically, for another coupon. They made a decision not to take useful resources away from society that they had a coupon for.

Who purchased it? I believe it's an advertisement for grading services/a way to grow the industry.

Probably laundering right?