Justin Cornett stopped in his tracks as he walked by a New York storefront at 484 Broome Street in March. His eyes fixed on a couple digital displays in the shop's window.
On the bottom floor of a gorgeous building typical of the Romanesque Revival stage that swept the city when it was built in 1891, huge screens bordered by gold frames boasted of the opportunity:
"Sports Memorabilia ... Art ... Spirits ... An Investment Fund ... Fractional Investment Platform."
"That's strange," Cornett thought, seeing all the items advertised in the sports category were already owned by Collectable, a fractional memorabilia company Cornett had sold items to and invested in.
There were other companies seemingly involved in the venture: "Dretore: Dare To Dream" on the awnings, and two other company names on the flashing carousel: "Nocor" and "Part Of: The Art of Investing."
But no Collectable logo.
Cornett couldn't have been mistaken. The game-worn jerseys, the cards ... they were all very specific items, including Kevin Durant's high school jersey and a LeBron James/Carmelo Anthony 2004 Exquisite Dual Logoman card.
The next day, Cornett set up an appointment, which is the only way to enter the building. He met with the person inside, but left with more questions than answers.
Cornett is not alone. He's one of many investors in Collectable who are concerned about the future of the items they still very much own.
It turns out, despite owning a majority share of some items in the gallery, Collectable investors have no say over when they are sold, the price they achieve, or whom they are sold to.
Collectable was started in 2020, on the heels of the initial success of Rally Rd, a concept that allowed non-accredited investors to buy fractional shares of cars and eventually other items.
Collectable struck deals to consign parts or full ownership of items that included Wilt Chamberlain's high school and rookie NBA uniforms, a 1952 Topps Mickey Mantle in a PSA 8, and a putter used by Tiger Woods. The company allowed investors to buy and sell shares just like they would buy stocks.
As such, every move is approved and monitored by the Securities and Exchange Commission. Collectable is required to file every single time an item had an "initial public offering" and detail every sale when a piece was sold, ideally at a profitable margin.
Collectable would make its money in two ways. Upon acquiring an item, the company would take a success fee, taken from the difference of the acquisition price and what the IPO value was assigned. Collectable also would benefit more from a sale, as the company gave itself free equity, usually a 3 to 5% ownership stake, that it would cash out with other investors.
But in three years time, liquidity proved to be an issue. Trading wasn't active enough, compliance was more expensive than budgeted for, and flips proved to be difficult. In its first full two years, Collectable offered 236 items and was able to sell off its stake in just 27 of them.
By the time the COVID collectibles boom was coming to an end in 2023, the frothy market Collectable had entered had dried up.
For the first six months of 2023, the sales had picked up. The company sold 74 assets, but acquired no new items. Sources said there were discussions to sell Collectable to big companies in the space, but the high valuations of assets when they were acquired made it difficult to achieve a profitable turnaround.
The platform's co-founder and CEO Ezra Levine also had already moved on.
In August 2023, Collectable was sold to Phil Neuman, president of a company called Luxembourg Life Funds, which specializes in life settlements. Life settlements involve buying up life insurance policies from people willing to sell them by taking over their policies and paying their premiums, betting the insured people will die before the policies run out.
Neuman bought Collectable for $1.35 million, according to documents filed with the SEC. The deal included Collectable's ownership stake in all of the assets, which added up to slightly more than the amount Neuman paid.
Investors weren't that concerned initially about the takeover. The items were still trading, albeit slowly, and the assets could always be liquidated to a healthy market.
That was until Cornett discovered the storefront in March and saw the items with his own eyes. Collectable previously kept all its assets in PWCC's vault in Oregon, but at some point, the new management brought at least some of them to the New York storefront. Collectable investors were not notified of the change, but nothing in the investment documents requires that disclosure.
The 1952 Topps Mickey Mantle in the gallery? Neuman, as part of the acquisition, only owns 2.4 percent of it. Collectable investors own the rest. Neuman owns just 4.4 percent of the 1955 Sandy Koufax in a PSA 9 and only 10.4 percent of Kobe Bryant's first game-worn No. 24 white jersey.
What about investors who are still actively trading the memorabilia? Well, they're not. Trading was halted in late April, when Collectable failed to file the necessary financial paperwork with the SEC.
How is Dretore's website advertising that interested parties can make an appointment to see the items and have "the unique opportunity to take an ownership stake in one – or in all"?
Calls placed by cllct to Neuman were not returned.
Investors next pointed to a woman named Adeliza Perez-Johnson, a former concierge at the Four Seasons in New York, who was made the CEO, COO, CCO and CFO of Collectable in April. When reached, Perez-Johnson said Collectable investors can e-mail her with questions, and all current inquiries have been answered. After ending the conversation prematurely, Perez-Johnson said she would call back. She never did.
When asked if cllct could come visit the gallery the following morning, Perez-Johnson didn't answer.
Investors say they have had similar experiences.
On May 24, Cornett offered to buy Luka Doncic's 2018-19 game-worn rookie jersey for $250,000. Cornett, who owned 10 percent of the jersey, said he got the person who owned 50 of the jersey to agree to the sale. Collectable only owns 4.3 percent of the jersey, but the company gets to make the final decision. Cornett showed cllct that he sent Perez-Johnson an email. It was not returned. He texted Neuman. It also went unanswered.
Michael Brown, who owns 13% in the 1933 Babe Ruth Goudey card worth around $15,000, reached out to the new Collectable management, asking to buy out the card. The last value being $125,000, Brown said he offered $130,000.
"They actually did answer," Brown said. "With a 'no.' So I said, 'OK, Can I see the card so that I can perhaps make a better offer?' I wrote them back five times. They never answered."
It turns out the investors might have no recourse.
Collectable is operating legally. The original operating agreement, which was conferred in the sale, stresses the manager of the assets has "no duty or obligation (fiduciary or otherwise) to give any consideration of any interest" including that of the investors.
Not only can the owner sell the items for whatever price he or she chooses, but the owner can deduct his or her costs from the sale before paying out investors.
Furthermore, Collectable's agreement does not specify the company has any duty to notify its investors of the movement of their assets and has no obligation to listen to their offers.
The previous management had the same rights, but Levine told cllct his management team operated in the best interest of its shareholders, despite what the documents allowed.
Levine said the former management team at Collectable encouraged offers and polled shareholders on whether they should accept them. Even though the management alone could have unilaterally decided, Levine said the company had a five-person committee scrutinizing offers and would only go against shareholder vote "if we felt very strongly or suspected inside dealings."
As for why the original executives at Collectable allowed such favorable provisions for ownership, Levine said the clauses were similar to other fractional companies. Rally, for example, has the same clause in its documents that says the manager of the assets also can act in his or her interests over that of the investors, cllct has confirmed.
"These operating agreements closely followed precedent set by other REG-A fractional ownership models," Levine said. "They were designed to provide flexibility and protection for managers, knowing a sense of fiduciary responsibility and shareholders' best interest was at the heart of every decision we made every day — regardless of the legalese."
Executives at fractional companies frequently have complained about how onerous the relationship with the SEC has been. So, how could the SEC allow a regulated company to issue operating documents to permit a manager of assets for a company to operate in its own best interests over the interests of its investors?
Five years ago, the SEC revised its Investors Advisors Act of 1940 to include an "Under Regulation Best Interest" clause.
Under Regulation Best Interest, broker-dealers are required to act in the best interest of an investor for which they are working.
But there's a loophole here for Collectable because the company itself is not a broker-dealer. Instead, it partners with broker-dealers to put out the offerings.
An SEC spokesman declined to comment to cllct when asked for an interpretation, saying the organization makes it a practice not to publicly comment on specific entities.
One investor, who sold shares of his Bill Russell, Bobby Orr and Durant jerseys to Collectable, said he's very concerned with the state of affairs.
"They are hostile, and they are holding our items hostage," he said, requesting anonymity. "Not only do I have so much money tied up in this, but I so believed in this platform. I feel terrible for my ex-girlfriend and my nieces and nephews who put money in."
Investors always have the rights to sue for fraud or willful negligence, but the provisions in Collectables' contracts would likely make a case difficult.
It's not like Collectable has run away with the investments. The company is showing what it owns in a huge retail space in New York, asking for more investors, while many original investors just want to know how to get out.
Darren Rovell is the founder of cllct.com and one of the country's leading reporters on the collectibles market. He previously worked for ESPN, CNBC and The Action Network.