Collectors are also confused about that $1.56M Super Mario 64 sale(arstechnica.com)
arstechnica.com
Collectors are also confused about that $1.56M Super Mario 64 sale
https://arstechnica.com/features/2021/07/collectors-are-as-confused-as-you-are-about-that-1-56m-super-mario-64-sale/
82 comments
And surprise, surprise Wata was just sold to collectorsuniverse.com
This seems plausible. My first thoughts were (1) fraud like you said or (2) money laundering.
Whoa, who said anything about fraud? Certainly not me. Pure coincidence!
The fact Wata Games doesnt publish population lists, like any other legit grading agency https://www.psacard.com/pop is simply an ordinary oversight on their part, and surely has no influence on the prices.
The fact Wata Games doesnt publish population lists, like any other legit grading agency https://www.psacard.com/pop is simply an ordinary oversight on their part, and surely has no influence on the prices.
Yup. This smells (no pun intended) of money laundering to me. Any auction for an obscurely collectible item is perfect for money laundering, since there’s a huge amount of plausible deniability in someone’s honest willingness to pay such an exorbitant sum.
More concretely, let’s say Joe Criminal has $1.56MM in ill-gotten gains. He proceeds to sell an obscurely collectible item in his possession at auction. Via a shell company/individual, he anonymously bids it up to $1.56MM, and pockets the money minus any auctioneer fees.
As long as the authorities don’t investigate the identity of this anonymous bidder, Joe Criminal has successfully laundered his $1.56MM. And as long as the authorities think that some crazy collector truly believes that an original Mario 64 cartridge is worth $1.56MM (as would also be the case for other obscure collectibles), it’s unlikely this particular transaction will raise their eyebrows. It’s not like there’s an army of appraisers out there who could fairly value this cartridge.
More concretely, let’s say Joe Criminal has $1.56MM in ill-gotten gains. He proceeds to sell an obscurely collectible item in his possession at auction. Via a shell company/individual, he anonymously bids it up to $1.56MM, and pockets the money minus any auctioneer fees.
As long as the authorities don’t investigate the identity of this anonymous bidder, Joe Criminal has successfully laundered his $1.56MM. And as long as the authorities think that some crazy collector truly believes that an original Mario 64 cartridge is worth $1.56MM (as would also be the case for other obscure collectibles), it’s unlikely this particular transaction will raise their eyebrows. It’s not like there’s an army of appraisers out there who could fairly value this cartridge.
Money laundering or also moving money out of countries with strict capital controls
It seems to me any reasonable money launderer would strive not to bring attention to himself, by outbidding the market value by such an extreme. You’d rather just do multiple transactions, maybe 20% above real value (which would further avoid vetting, by being a standard player in that market)
> it’s unlikely this particular transaction will raise their eyebrows
Considering it's national news, would they really not investigate it? It seems waaaaay too conspicuous and high-profile to be an attempt at money laundering.
And from what I understand, auction houses are now required to file a 1099-K with the IRS so that the seller can't hide from taxes, or hide their identity.
So even without the news, something tells me that filing capital gains tax on a ~3,000,000% return for a video game cartridge is going to flag a little bit of suspicion... ;)
Considering it's national news, would they really not investigate it? It seems waaaaay too conspicuous and high-profile to be an attempt at money laundering.
And from what I understand, auction houses are now required to file a 1099-K with the IRS so that the seller can't hide from taxes, or hide their identity.
So even without the news, something tells me that filing capital gains tax on a ~3,000,000% return for a video game cartridge is going to flag a little bit of suspicion... ;)
Money laundering is not the same as tax evasion. The seller doesn’t care about hiding from taxes; he cares about hiding the true source of his illegal income. If anything, paying taxes on laundered money makes it look more legit.
The only party who needs to hide their identity here is the buyer, since unmasking them would reveal that no money actually changed hands. As far as the seller’s concerned, he wants to appear as if he earned $1.56MM of legitimate taxable income selling an old N64 cartridge to some crazy anonymous buyer.
The only party who needs to hide their identity here is the buyer, since unmasking them would reveal that no money actually changed hands. As far as the seller’s concerned, he wants to appear as if he earned $1.56MM of legitimate taxable income selling an old N64 cartridge to some crazy anonymous buyer.
Right, but the seller (who the IRS knows about) is the one who can clearly be suspected of being part of the laundering.
The IRS refers signs of money laundering to the relevant investigative agency, whether when a car wash mysteriously multiplies its earnings by 50x all in cash transactions, or when somebody suddenly gets mega-gigantic super-super-suspect capital gains.
The relevant agency is going to ask the auction house who the buyer was, the auction house is going to comply, they'll trace shell companies as needed, end of story. It's not anonymous once the police/feds start investigating.
Money laundering is successful when it stays hidden among seemingly normal transactions. Not when it sets splashy newsworthy records.
The IRS refers signs of money laundering to the relevant investigative agency, whether when a car wash mysteriously multiplies its earnings by 50x all in cash transactions, or when somebody suddenly gets mega-gigantic super-super-suspect capital gains.
The relevant agency is going to ask the auction house who the buyer was, the auction house is going to comply, they'll trace shell companies as needed, end of story. It's not anonymous once the police/feds start investigating.
Money laundering is successful when it stays hidden among seemingly normal transactions. Not when it sets splashy newsworthy records.
Its bigger than some random money laundering. "This morning on 7/14/21, PSA-grading parent company Collectors Universe just acquired Wata Games. The timing is anything but coincidental after the gigantic Heritage Auctions activities this past weekend." https://www.youtube.com/watch?v=7ARoutGa4vQ
Also entirely possible that it’s a pump-and-dump scheme to inflate the prices of old videogames. I think we both agree that the buyer and seller are the same entity.
>obscure collectibles
"bestselling Nintendo 64 game, with more than eleven million copies sold by 2003"
>army of appraisers out there who could fairly value this cartridge
Cartridge is worth between 10 and 40 dollars and can be bought in every single retro gaming shop on planet earth due to manufacturing numbers and popularity. All the "value" is in the cellophane shrink wrap and magical Grading, highest ever despite this particular box having crushed corners. Its almost like the price had no connection to actual item being sold.
"bestselling Nintendo 64 game, with more than eleven million copies sold by 2003"
>army of appraisers out there who could fairly value this cartridge
Cartridge is worth between 10 and 40 dollars and can be bought in every single retro gaming shop on planet earth due to manufacturing numbers and popularity. All the "value" is in the cellophane shrink wrap and magical Grading, highest ever despite this particular box having crushed corners. Its almost like the price had no connection to actual item being sold.
I’m surprised nobody raised the issue of re-wrapping opened boxes…
By “obscure collectible,” I meant something that most people generally don’t consider to be a collectible, not that the item itself is obscure. This makes it harder to fairly value it (great for money laundering), since there just isn’t any appraisal market for the item.
There was no cartridge, no game, just a hollow simulacrum of “Super Mario 64” foggily formed by the hype surrounding it. See also the $18k invisible sculpture: https://news.artnet.com/art-world/italian-artist-auctioned-o...
IDK how this works. Are these auctions settled in cash, with no link to the banking sector? Wouldn't the _buyer_ be automatically suspect?
It feels like the more likely play would be just plain old fraud. With an accomplice, shill bid your item from 200 bucks to 1.56 million, and hope someone else decides that auction was legit enough to buy off you; even if it comes in 10 below previous auction, it's a coup.
Or if it is stolen or damaged in a fire, insurance would be able to help make you whole.
It feels like the more likely play would be just plain old fraud. With an accomplice, shill bid your item from 200 bucks to 1.56 million, and hope someone else decides that auction was legit enough to buy off you; even if it comes in 10 below previous auction, it's a coup.
Or if it is stolen or damaged in a fire, insurance would be able to help make you whole.
Typically the sale of luxury goods is part of the integration phase in ML. This is when the money is finally transferred back to the criminal and so it is important to be within the financial sector.
It presents a very straightforward way to legally transfer a large sum of money to the criminal (the seller).
Having said that, I'd imagine you'd want to avoid media attention so transactions like this seem unlikely to be ML to me.
It presents a very straightforward way to legally transfer a large sum of money to the criminal (the seller).
Having said that, I'd imagine you'd want to avoid media attention so transactions like this seem unlikely to be ML to me.
While I agree with you on the practical difficulties, the reason it's so clever is right in OP's comment: "there’s a huge amount of plausible deniability in someone’s honest willingness to pay such an exorbitant sum."
That rings true for me -- think of any collectible and the prices people are willing to pay. At the extreme: large sums for things most people find totally irrational. Who are you to tell a high bidder that you don't believe they are genuinely interested, when you know nothing about them other than the bid?
That rings true for me -- think of any collectible and the prices people are willing to pay. At the extreme: large sums for things most people find totally irrational. Who are you to tell a high bidder that you don't believe they are genuinely interested, when you know nothing about them other than the bid?
Technically, you'd need two bidders if this is an open auction, or you'd also have to explain why you outbid second place by so much.
And to answer my own question: apparently it's not required for auction houses to vet buyers, and this has been discovered by russian oligarchs evading US sanctions. Congress passed a law on Jan 1 to make that illegal -- overriding Trump's veto, naturally. It specifically mentioned 'antiquities' so presumably people are testing the waters elsewhere.
And to answer my own question: apparently it's not required for auction houses to vet buyers, and this has been discovered by russian oligarchs evading US sanctions. Congress passed a law on Jan 1 to make that illegal -- overriding Trump's veto, naturally. It specifically mentioned 'antiquities' so presumably people are testing the waters elsewhere.
I was confused as to how the buyer would escape scrutiny as well.. So the answer is that if the buyer isn't vetted, then the seller could pretend to be multiple buyers and bid up the price to the desired amount.
The settlement would then be made (or at least documented as being made) in cash.
The settlement would then be made (or at least documented as being made) in cash.
The mere existence of a third party being able to look at financial data doesn't automatically make you vulnerable, so having convoluted additional third parties like insurers pay out with “clean money” isnt necessary, nor is absolute anonymity to banks or government necessary.
Just because there could be a bank or lawyer or someone that can see where the money came from doesn't mean that you can't successfully pass muster.
Protip: A federal money laundering conviction requires an illicit origin. Successful money laundering never has an illicit origin.
Therefore, money laundering charges can only be tacked on retroactively, in addition to another charge based on an illegal action that occurred.
And simply having or moving money is not probable cause. But obviously people can mess this up if they really didn't bother covering their tracks. But if they actually laundered it already then no.
Just because there could be a bank or lawyer or someone that can see where the money came from doesn't mean that you can't successfully pass muster.
Protip: A federal money laundering conviction requires an illicit origin. Successful money laundering never has an illicit origin.
Therefore, money laundering charges can only be tacked on retroactively, in addition to another charge based on an illegal action that occurred.
And simply having or moving money is not probable cause. But obviously people can mess this up if they really didn't bother covering their tracks. But if they actually laundered it already then no.
> And simply having or moving money is not probable cause.
What do you mean? AML laws specifically call for investigating suspicious transactions.
What do you mean? AML laws specifically call for investigating suspicious transactions.
They require banks to file notices of some transactions from non-KYC’d sources
But not from sources they’ve assumed to be KYC’d
The notice merely gives the government paperwork to make their job easier if an investigation begins. It doesn’t begin the investigation.
But not from sources they’ve assumed to be KYC’d
The notice merely gives the government paperwork to make their job easier if an investigation begins. It doesn’t begin the investigation.
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What’s confusing? Bubbles abound.
20 year old pickup trucks with six figures on the odometer are selling for $20k. Pokémon cards are going for millions. Houses are being bought above asking price, sight unseen. P/E ratios on the stock market have gone to plaid. An NFT collection of animated gifs sold for Picasso prices. And a satirical, dog meme currency has a $25b market cap.
It’s unsustainable, but you won’t find me making big bets one way or the other, because, as John Maynard Keynes said, “the markets can remain irrational longer than you can remain solvent.”
20 year old pickup trucks with six figures on the odometer are selling for $20k. Pokémon cards are going for millions. Houses are being bought above asking price, sight unseen. P/E ratios on the stock market have gone to plaid. An NFT collection of animated gifs sold for Picasso prices. And a satirical, dog meme currency has a $25b market cap.
It’s unsustainable, but you won’t find me making big bets one way or the other, because, as John Maynard Keynes said, “the markets can remain irrational longer than you can remain solvent.”
“the markets can remain irrational longer than you can remain solvent.”
Interesting Nit: Recently learned that this wonderful quote is from the 80s, and not from Keynes:
https://quoteinvestigator.com/2011/08/09/remain-solvent/
Interesting Nit: Recently learned that this wonderful quote is from the 80s, and not from Keynes:
https://quoteinvestigator.com/2011/08/09/remain-solvent/
Physical goods are only going to get more rare as our digital economy grows, so the spend per article will increase on non-bit items.
Hehe, "physical goods" :) So in the case of Mario64 that would be the PCB and the plastic cartridge and the shrink wrap?
> Physical goods are only going to get more rare as our digital economy grows
What is the reasoning to back this up?
What is the reasoning to back this up?
Part of it may be that many cultural things do not have a physical representation (or they're greatly curtailed).
Every copy of World of Warcraft was sold in a box - but many copies of the latest expansion were sold digitally, no box to preserve at all.
Every copy of World of Warcraft was sold in a box - but many copies of the latest expansion were sold digitally, no box to preserve at all.
The scarcity of an item like a 25 year old Nintendo game will only increase with time, I think was the authors intention
And why would that be scarce if we had, say, a way to perfectly clone such items?
It's actually quite trivial to do, only copyright is stopping that. The original has no intrinsic value over a perfect physical copy. (As opposed to a reproduction.)
It's actually quite trivial to do, only copyright is stopping that. The original has no intrinsic value over a perfect physical copy. (As opposed to a reproduction.)
>It's actually quite trivial to do, only copyright is stopping that.
That's not true at all. I sell games as a business and have to check them for authenticity. Things like print patterns and tactile properties of the gloss are both incredibly consistent across the genuine product and nearly impossible to reproduce perfectly.
There are plenty of $1000+ games that have been around for decades, and not once has there even been a repro made that could pass as genuine to even an amateur.
As far as copyright goes, outright pirate carts have been a thing since the atari days.
That's not true at all. I sell games as a business and have to check them for authenticity. Things like print patterns and tactile properties of the gloss are both incredibly consistent across the genuine product and nearly impossible to reproduce perfectly.
There are plenty of $1000+ games that have been around for decades, and not once has there even been a repro made that could pass as genuine to even an amateur.
As far as copyright goes, outright pirate carts have been a thing since the atari days.
Value is subjective. People value original artwork even though we can do per pixel exact copies beyond the resolution limit of human vision :)
Problem is you don't have the choice of not choosing, you can only choose a cash position :(
Cash ius even worse a choice than usual. High inflation and low rates make cash the worst investment possible. Currently losing 1% every month
The counter is if you hold cash when other assets crash your cash will likely retain its worth (currency depending). That said right now cash is not a great asset to be holding - with inflation on the rise.
Is it a bubble? Or is it devaluation of the dollar?
How many sealed copies of Super Mario 64 remain in the world? Seems like yesterday that this game was launched.
Story aside, I absolutely loved this game as a kid. I remember excitedly waiting this game. Nintendo Power shipped out a VHS cassette to hype the Sept 29, 1996 launch of the N64 that summer. I watched it over and over, I was so amazed by the graphics and the gameplay.
For months after Super Mario 64 launched there were lines at Walmarts and video game stores showing off demos of it, of people waiting to play it. It was a huge event.
The freedom of being able to run around and go anywhere in this game, I had never quite seen before. The fun of Mario's acrobatic maneuvers like wall jumps, triple jumps, stomps, and the flying cap were jaw dropping at the time. I can totally see why this game has sentimental value.
I don't know if the rarity of sealed copies is sufficient to justify the price, but it is a masterpiece.
Story aside, I absolutely loved this game as a kid. I remember excitedly waiting this game. Nintendo Power shipped out a VHS cassette to hype the Sept 29, 1996 launch of the N64 that summer. I watched it over and over, I was so amazed by the graphics and the gameplay.
For months after Super Mario 64 launched there were lines at Walmarts and video game stores showing off demos of it, of people waiting to play it. It was a huge event.
The freedom of being able to run around and go anywhere in this game, I had never quite seen before. The fun of Mario's acrobatic maneuvers like wall jumps, triple jumps, stomps, and the flying cap were jaw dropping at the time. I can totally see why this game has sentimental value.
I don't know if the rarity of sealed copies is sufficient to justify the price, but it is a masterpiece.
We don't know. It's not that rare though, pricecharting seems to have 1 on average sold a month. The "condition" and high grade of 9.8 are supposedly what makes this super valuable. The thing is grading is somewhat subjective and depends on the grader. It's entirely possible to crack the thing open get it re-graded and have it come back as a 9.5.
It's also entirely possible that someone out there still has a sealed case of the thing and we just don't know about it since it's such a common game. The price to me is just incredibly detached from reality.
It's also entirely possible that someone out there still has a sealed case of the thing and we just don't know about it since it's such a common game. The price to me is just incredibly detached from reality.
It’s staged just like the NFT auctions. Bootstrapping demand by fabricating a sale between two cooperating parties.
Basically just the start of another pump and dump scheme.
I've been a game collector for several years now. At the start of the pandemic, when every other other collectible started rocketing up in price, retro video games were no exception. Some games have doubled or tripled in price. However I'm not sure how susceptible they are to pump and dump schemes. They are fairly large physical objects, compared to trading cards and digital goods. The auction process and shipping takes takes days for one item to move. You can sell them to retro stores, but only for about 30% of their ticket price. Prices have remained stable according to reliable trackers [0].
0: https://www.pricecharting.com/game/super-nintendo/earthbound
0: https://www.pricecharting.com/game/super-nintendo/earthbound
Won't they have to pay tax on that though?
Only if money actually changed hands...
That's the point - you launder money by paying taxes on it.
You launder the money by inconspicuously inserting into legitimate accounting. The whole point is that you’re trying to avoid attention. The taxes are an unfortunate side effect.
An auction that makes the news is nothing if not conspicuous. It’s tantamount to lighting a sign and saying “follow the money trail starting here”
An auction that makes the news is nothing if not conspicuous. It’s tantamount to lighting a sign and saying “follow the money trail starting here”
I don't think that's the point in GP's post. I think GP means they stage a big "sale" and make headlines, so people start looking for mint condition N64 games, already primed to think of them in terms of millions instead of thousands of dollars. Conveniently, they would have bought up all of the rare games before this.
I was talking about this in a Facebook chat for video game dealers. We are as confused as Kelsey is. Something seems genuinely fishy here.
Definitely fishy to me. 1008 Alpha Black Lotuses printed and a perfect one sells for half a million. 12 million copies of Mario 64 and then this price for one with fucked up corners, no way.
The article pretty much answers the question. This is part of the price discovery process in the extreme high end of what's basically a new market. There's a grader and an auction house that are relatively new developments in this market, and that makes big money collectors comfortable coming into what to this point had been much less formalized.
It's not the first time this has happened in a collectibles market, and it won't be the last.
It's not the first time this has happened in a collectibles market, and it won't be the last.
There are no collectors here, though, only self-dealing dealers pumping up prices.
Easy money:
1. Discover old stock of sealed Mario cartridges
2. Get your friend to help you "sell" one for a million bucks
3. Auction off the rest one at a time for a much more reasonable $100,000 a pop
1. Discover old stock of sealed Mario cartridges
2. Get your friend to help you "sell" one for a million bucks
3. Auction off the rest one at a time for a much more reasonable $100,000 a pop
Heritage only sells graded games.
Wada Games is the grading body, they wont grade your copy higher than the one that just sold, despite the fact it had a crushed box.
Nobody will pay 100K for most common game in N64 history.
Car analogy time: Imagine waking up in a reality where Auction house dealing in art decides to do cars and in their first auction sells 2001 Mexico made VW Beetle they graded "pristine" (despite dented fender) for $80 million dollars while simultaneously selling $16K "pristine-" 1967 Beetle and $6mil Porsche 911 GT1 Strassenversion (20 ever made)
Wada Games is the grading body, they wont grade your copy higher than the one that just sold, despite the fact it had a crushed box.
Nobody will pay 100K for most common game in N64 history.
Car analogy time: Imagine waking up in a reality where Auction house dealing in art decides to do cars and in their first auction sells 2001 Mexico made VW Beetle they graded "pristine" (despite dented fender) for $80 million dollars while simultaneously selling $16K "pristine-" 1967 Beetle and $6mil Porsche 911 GT1 Strassenversion (20 ever made)
Really surprised the article didn't mention the practice of money laundering.
If one wants to launder money, creating an eyebrow raising sale gathering press headlines and bafflement from insiders is not a great way.
You want to be under the radar for money laundering. Not impossible, but another explanation seems more likely. (I don’t mean an innocent explanation necessarily)
You want to be under the radar for money laundering. Not impossible, but another explanation seems more likely. (I don’t mean an innocent explanation necessarily)
Maybe it's like a variation on the old fiddle scam. Someone (with high-grade stock) are working with someone inside, and now they're trying to pump up prices to attract unsuspecting new money.
It's no different than selling art, only that the rating companies are the ones setting the standard for how "rare" something is.
9.4 rating? Sorry, dime a dozen.
9.6? Million dollar piece.
It's no different than selling art, only that the rating companies are the ones setting the standard for how "rare" something is.
9.4 rating? Sorry, dime a dozen.
9.6? Million dollar piece.
Tangent: Love how the article is about Super Mario 64 but the picture at the top is of a Super Mario World cartridge.
We're getting old. On a TV quiz show I was idly consuming last night, the topic was 1989-2019s Japan and a young guy's question was "what is this console" with a picture of a GameCube. He answered "NES" ...
A bit less confusing for me compared to recent $$$ NFT sales.
It's similar to MTG cards. That's what happens when you have a large fanbase plus considerable disposable income
Not this time
Except this time there is no rarity element. Somehow as by magic the most popular games sold in tens of millions are reaching records.
That's why collectors introduce grading to these things, they desire rarity and grading provides it.
Except there already is rarity in retro games. There are games with "Only 13 copies are known to exist" https://en.wikipedia.org/wiki/Air_Raid_(1982_video_game) - this one sold for mere $16K at the same auction. Then you have your classic https://en.wikipedia.org/wiki/Nintendo_World_Championships with ~90 in circulation $180K at same auction. They all got outbid by the most common games ever released on the platform.
Money laundering? Seems obvious to me.
How can you confirm that the sealed object is not a fake? Sealing an object is quite easy no?
That money's not going to launder itself, what's confusing?
How collectors differentiate one mass produced item from another?
grading
Which one has the most nostalgia. And super Mario 64 revolutionized 3d controls at the time, rather pivotal game.
By rarity. But this isnt collectors, this is a scam pumping fake values for popular items by manufacturing rarity thru grading of the cellophane on a video game box.
Well, with some collectibles, you can go into manufacturing variations.
Here's a real-world example: http://maibockaddict.com/1831-capped-bust-half-dollars.shtml
The 1831 date as a whole had a production run of a bit under 6 million, but it can be broken into 20 widely recognized sub-types. These have established survival/rarity figures from surveys of the market and community-- some are "two dozen or so known" and some are "hundreds or thousands".
It feels like they're trying to mimic the concepts from the coin hobby-- numeric grading, the appearance of third party certification and encapsulation-- without developing the background and ecosystem for it first.
For example, those "20 sub-types" trace back to a paper book originally published over 50 years ago, actual research performed by a passionate expert which has been expanded on by the community. The grading conventions are even older.
Here's a real-world example: http://maibockaddict.com/1831-capped-bust-half-dollars.shtml
The 1831 date as a whole had a production run of a bit under 6 million, but it can be broken into 20 widely recognized sub-types. These have established survival/rarity figures from surveys of the market and community-- some are "two dozen or so known" and some are "hundreds or thousands".
It feels like they're trying to mimic the concepts from the coin hobby-- numeric grading, the appearance of third party certification and encapsulation-- without developing the background and ecosystem for it first.
For example, those "20 sub-types" trace back to a paper book originally published over 50 years ago, actual research performed by a passionate expert which has been expanded on by the community. The grading conventions are even older.
money laundering or some tax fuddly-duddly would be my guess?
I'm not. Easy way to launder money. People have no idea how much money laundering is currently going on. That's what a lot of these speculative vehicles are great for.
money laundering & tax evasion. there, we solved it.
I think they are just trying to raise the value of the collection so that the sideline investors will get their attention about the said sale.
Just a reminder, the previous record holder Mario sold at Heritage Auctions and graded by Wata Games was purchased by Jim Halperin - owner of Heritage Auctions with a seat on Wata Games board, pure coincidence Im sure! https://arstechnica.com/gaming/2019/02/how-this-ultra-rare-c...
"Jim Halperin, owner of Heritage Auctions and one of three buyers"... "Halperin sits on the advisory board for Wata Games"