The past two years have brought a frenzy of bidding at auction houses from buyers in China, who have made headlines by setting sky-high records for Chinese art at auction after auction, especially on the mainland (but also as far away as rural England). But the madness has also brought about a slew of fraud allegations about Chinese buyers, sellers, auction houses, and experts. Two recent stories, one in the British paper the Telegraph and one by NPR, are particularly damning. Below is a breakdown of the issues that Chinese auction houses face, some well-known, others newly uncovered.

INAUTHENTIC WORK

There have been a few examples of this allegation, but the most famous is the allegedly fake Xu Beihong painting which sold for $11.4 million in Beijing last year. The seller billed it as a portrait by the well-known Chinese artist depicting his wife. However, several students who attended the Central Academy of Fine Arts in the early 1980s have offered proof that the work was actually painted by them for a class in 1983 (30 years after Xu died), making the painting nearly worthless.

CORRUPT OR NONEXISTENT EXPERTS

In a particularly juicy example of phony authentication highlighted by NPR, a Chinese businessman faked a rare jade burial suit and got five experts to authenticate it. Then he used the appraisal to post the jade suit as collateral for a $100 million bank loan (for a real estate project, which also turned out to be fake). The authentication issue is further exacerbated by the fact that, under Chinese law, auction houses are not responsible for the authentication of a work as long as a disclaimer is issued.

At least one Chinese auction house is actively trying to cut down on the lack of strict authentication methods. In a recent interview with ARTINFO in New York, China Guardian's vice president and director, Kou Qin, said executives from Guardian were visiting the United States to try to learn from the successful business models of their counterparts based in the west, Sotheby's and Christie's. One of the major tenets of the western auction business that Kou said he would take back to China was the importance of independent experts to authenticate the work based on a "scholarly standard."

FAKE BIDDING

According to both articles, Chinese auction houses have become a channel through which to pay bribes. Like laundering money through the front of a legitimate business, sometimes mediocre art soars above estimates in Chinese auction houses because the bidder owes the seller money, and an auction is a legal way to pass along a payment. Auction house staff may turn a blind eye to this even if they know what's going on because higher bids mean higher fees headed their way.

Dealers, sellers, or artists also sometimes bid up works they don't intend to buy just to create a higher market price for that artist (this practice, however, is somewhat old hat — common enough in auction houses all over the globe, at least for art dealers).

UNPAID BILLS

The story of debts left outstanding is not new — it caused Sotheby's to begin demanding deposits for many of its highest-priced lots. But the two articles both point to a startling new statistic from the Chinese Association for Auctioneers, which notes that 40 percent of lots sold for above 10 million yuan ($1.5 million) during last autumn's auction season in Chinese auction houses had not been paid for by April 2011 (under Chinese law, the buyer has six months to pay).