Bloomberg has delved into the filings on the Shagalov case to unearth the other issue in the case. Sotheby’s resold the Haring tarp for $4.4m to the third-party guarantor after going back to the other bidders. Shagalov complained that the work was being sold below market value. He made that claim based upon a letter of intent from a Spanish buyer:

Two months after Sotheby’s sued, Shagalov says he found a potential buyer for the Haring work on his own — Marco Mercanti, founder of the Madrid-based art firm Oblyon. Mercanti conditionally agreed to pay $5 million through a financing agreement with JPMorgan Chase & Co., according to court papers. Shagalov says that offer — memorialized in an October letter filed in court — is evidence that Sotheby’s failed to get the best possible price on the resale.

Unfortunately, the letter offered seems to have been back-dated to before Sotheby’s demands for payment from Shagalov. That has raised a a separate set of issues about the lawyers. But on the point of the reasonable value of the work, Mercanti seems to have evaporated as a serious buyer once the legal issues surrounding the work were revealed to him and his firm.

There’s a deeper issue here that Bloomberg points out that Shagalov’s lawyer, Mathew Hoffman, has been remarkably frank about. As the art market continues through nearly a decade of steadily rising values, there are more and more buyers out there who engaged in highly leveraged art-trading.

Shagalov’s business, based in Great Neck, New York, is “always the same, which is borrow money, buy art, sell art, pay loans back,” his attorney, Hoffman, said at a Jan. 9 hearing, according to a transcript. “This was an ordinary course of business transaction for him.”

One has to wonder how many art buyers out there are equally leveraged.

Sotheby’s Battles N.Y. Art Dealer Over Keith Haring Winning Bid – (Bloomberg)