New York-based socialite and collector Libbie Mugrabi has made headlines over her ongoing dispute with a lending company specializing in art-backed loans. The dispute stems from a failed transaction in 2023 when Libbie sought a $3 million loan from Art Capital Group.
As part of the deal, Libbie was to put up a 1982 Jean Michel Basquiat worth an estimated $30 million as collateral. She decided to put up an Andy Warhol painting from his Jacqueline Kennedy Onassis portrait series as additional collateral to cover a $12,500 due diligence fee needed to secure the loan. While the Basquiat remained in Libbie’s possession, ACG took the Warhol painting.
A Loan Gone Wrong
The standard transaction went haywire after ACG declined to give Libbie a loan, citing concerns about her credit, but didn’t return the Warhol. Libbie filed a police report in Southampton, N.Y., alleging that the ACG stole the Warhol. ACG also alleges that Libbie distributed “Wanted” posters in front of their Upper East Side offices and in the Hamptons, featuring photos of ACG’s directors, prompting the company to hit Libbie with a $30 million defamation lawsuit.
Not one to shy away from the spotlight, Libbie famously wore a bulletproof vest to a divorce hearing, claiming her billionaire ex-husband, art collector David Mugrabi, tried to hire a hitman to kill her. However, while Libbie’s alleged behavior towards ACG appears outlandish, this case has more substance than what appears on the surface.
For starters, in an October 2024 story, Artnet reported that the fees owed to ACG by Mugrabi were initially under $27,000, based on court records, but ballooned to about $97,000 (in a more recent story, The New York Times reports that Ian Peck, a director at ACG, asserted in court documents that the company costs have risen to over $200,000, not including reputational damages or anticipated future attorneys’ fees). The Warhol is believed to have been sold off by ACG to cover the unpaid fees despite alleged offers by Libbie to pay all the fees stemming from the loan application; details about the price are muddled, and the buyers haven’t been disclosed. According to The New York Times, lawyers for Libbie have argued in court papers that the painting’s value is far more than the company’s actual expenses.
Furthermore, Libbie asserts that only the Warhol was agreed on to be collateral for the fees. Yet, the fate of the Basquiat remains in limbo. According to court documents, ACG is arguing that it’s entitled to possession of the Basquiat as well to cover “what it views as the additional cost of damage to its reputation.”
Art as Collateral Gains Traction
As Sherri Cohen and Monika Merchan discuss in their forthcoming article for Trusts & Estates, art is increasingly being acknowledged as a powerful asset class that’s widely marketable and holds financial power as collateral. While rates can be higher with art-backed loans due to the sometimes unpredictable and volatile nature of the art market, clients are increasingly seeking to leverage their collections to access liquidity as well as “built-in appreciation without selling the art.”
Unlike other loans, using art as collateral has additional costs—including appraisal, insurance and storage fees. If a loan application fails to go through, the applicant is left footing the bill for the appraisal and other due diligence fees, not unlike the case discussed here.