The Telegraph has the best reporting on this story:
The world's biggest violin dealer, Dietmar Machold, is facing the music in court, accused of fiddling millions from investors
News of the arrest last year of the international violin dealer Dietmar Machold in the Swiss resort of Zermatt was met with incredulity by many in the arts.
It seemed unthinkable that the German millionaire who supplied such orchestras as the Vienna Philharmonic with fine violins and lent multi-million-dollar Stradivaris to artists including Midori, Hilary Hahn, Robert McDuffie and Shlomo Mintz had committed a crime.
It was not until last December, when Machold was extradited to Austria, where he was put behind bars, that the world's auction houses, concert halls and conservatoires began humming with intrigue.
In musical circles Machold, 63, was a major figure: few in that world had not done business with him over the past 25 years. With an empire that stretched from Vienna, Berlin, Bremen and Zurich to New York, Chicago, Tokyo and Seoul, he dealt almost exclusively in rare stringed instruments by the 17th- and 18th- century Italian masters Antonio Stradivari, Guarneri del Gesù, Carlo Bergonzi and JB Guadagnini; he persuaded hedgefund managers, banks and other institutions to buy these costly instruments as an investment and lend them to the rising stars of the concert hall.
HT: naked capitalismRegarded by many as the most influential dealer in the world, Machold, who went on trial last month on charges of serious fraud, embezzlement, misappropriation and fraudulent bankruptcy to the tune of about €250 million, may soon be reviled as the 'Bernie Madoff of the violin world'.
With his trial due to resume on November 5 in Vienna (following an adjournment), musicians, arts organisations and financial institutions are waiting to learn how it will be suggested that Machold could for so long have got away with buying and selling the world's most sought-after violins without anyone suspecting that his apparently stellar business was an elaborate charade.
To outsiders, the global violin market's lack of transparency, its absence of an independent regulatory body, and its tiny group of major dealers make it seem potentially more corrupt than any other area of the art market. It is common for dealers not to disclose either the provenance or the original purchase price of a violin, or their own commission, which can be as much as 30 per cent of the sales price. Deals may be concluded with a nod and a handshake without an invoice changing hands, and it is accepted practice for one dealer to send an instrument to a colleague to find a buyer, allowing both dealers to split an extra-large commission. This explains why clients were slow to question whether Machold was double-crossing them. Those who entrusted their instruments to him for sale were told to be patient, sometimes for several years, when apparently there was no buyer.
The prosecution's case is that Machold was able to use the same violins as collateral for loans from numbers of banks and financiers without being found out because it is accepted practice for rare instruments bought as investments to remain in the dealer's climate-controlled vaults, or to be lent to musicians (Machold's mantra was that rare violins must be played constantly to preserve their unique qualities; many experts disagree). It is suggested that some violins that he pledged to cover loans simply did not exist: names and provenances were invented, fake certificates supplied. His valuations were also vastly inflated, by as much as 75 per cent, it is said – mark-ups that lenders never challenged.
Creditors fearing that millions of euros lost through fraudulent deals will never be recouped believe the complete truth may be yet to emerge in a case riddled with cover-ups, conspiracies and unanswered questions. In Vienna there is gossip over the length of his likely prison sentence, which – if he is found guilty – could be up to 10 years.
Not everyone is surprised at Machold's reversal of fortune. Within the trade the image emerges of a charming and sophisticated wheeler-dealer with a largely self-styled reputation as an unchallenged expert in fine violins. 'It wasn't a question whether Machold was going to get into trouble with the authorities,' one leading London dealer says. 'The only question was when it would happen, and how many millions would be involved.'
Most established violin makers and dealers have always been perplexed by Machold's image as a glamorous power dealer with an ostentatious playboy lifestyle. 'He seemed to do business with incredibly powerful, wealthy people, not with the artists, orchestras and schools most of us deal with,' says Simon Morris, a partner of the London dealer Charles Beare, regarded as the world's leading authority on stringed instruments. As Morris points out, not even top-end violin dealing confers riches of the kind flaunted by Machold.
Born into a modest Bremen family of violin makers with a business that had been founded in 1861, Dietmar Machold began making his name only in the 1980s. There was always something of the Jay Gatsby about him. According to the Philadelphia violin appraiser and historian Philip J Kass, 'He seemed to come out of nowhere. None of us knew anything about him: he was an arriviste. Suddenly he was doing a tremendous amount of business in big-name instruments, although Germany had no market presence. No one knew his origins or how he managed to get his hands on so many very valuable instruments."...MUCH MORE