Looking back now, friends say that it was clear last summer that something was bothering Larry Salander. He had stopped returning their phone calls, and many hadn’t spoken to him or seen him in months. Those who had run into him on the street or seen him briefly at Salander-O’Reilly, his gallery on Manhattan’s Upper East Side, were struck by how haggard he looked. He seemed distracted and tense, "totally wired," one artist and longtime friend recalls.

By late June, many who knew Salander were aware that he was under some financial pressure, though they did not know all the details. In May, he’d been sued by two clients—the tennis star John McEnroe and Earl Davis, the son of the noted American painter Stuart Davis—who claimed that Salander owed them money and, in Davis’ case, paintings by his father that had been stored at Salander’s gallery and were now missing. (See a slideshow of some of the players and victims.)

Together, McEnroe and Davis were demanding more than $3 million from Salander, but more remarkable than the amount of money involved was the fact that the suits had been filed by two of the art dealer’s closest friends. Disputes between clients and dealers are not uncommon in the art world, and many thought that if Salander was experiencing any financial strain, it was a short-term problem that he would soon resolve.

At 58, Larry Salander was one of New York’s most respected and powerful art dealers. During his 35 years in the business, he had developed a sterling reputation, not only for his integrity, his eye for quality, and his brilliant shows, but also for his business acumen. In 2003, an art-industry report had named Salander-O’Reilly the best gallery in the world, and although not everyone shared that view, by 2007 many believed that Salander was well on his way to achieving that distinction. Some were surprised when, about six years ago, Salander—who had long specialized in American Modernists—suddenly began to expand into Gothic, Baroque, and Renaissance art. But others applauded it as a sign of his originality and boldness, as they did the opening, in the fall of 2005, after a renovation rumored to have cost more than $2 million, of Salander’s new gallery on East 71st Street in a magnificent 25,000-square-foot, seven-story Italianate mansion, whose sweeping marble staircases and velvet-lined rooms were reminiscent of the grandest old European galleries.

It was in this space, on October 17, that Salander was scheduled to open perhaps his most impressive show. Titled “Masterpieces of Art: Five Centuries of Painting and Sculpture,” the exhibition was to feature a breathtaking array of old-master works, including pictures by Rubens, El Greco, Titian, Botticelli, and, most eagerly anticipated in the art press, an astounding four works by Caravaggio. If Salander was having financial problems, the upcoming show should have eased his worries; as he let it be known, he was anticipating sales of close to $500 million from the exhibition. Indeed, the centerpiece of the show—Apollo the Lute Player, recently reattributed to Caravaggio—was to go on sale for $100 million.

Yet as the date approached, Salander seemed to grow only more tense. Sometime in August, after trying for months to find out what had happened to 18 of his paintings that had been lent to a gallery in Rome, the artist Paul Resika spoke to Salander on the phone and was shocked when the dealer lashed out, accusing Resika of having betrayed him and their 20-year friendship because Resika had spoken to Robert De Niro about several paintings by the actor’s father that, like Resika’s works, also had not been returned after an exhibition at the Italian gallery. Not until the third week of October would Resika, De Niro, and other friends finally discover what had been bothering Salander.

People had already begun to line up outside for the opening of “Masterpieces of Art” late on the afternoon of October 17 when it was announced that the show had been canceled. Two days later, the art world was shocked when the Salander-O’Reilly gallery was closed and its doors padlocked as a result of an order by a New York State Supreme Court judge, ruling in two of what would soon turn out to be more than 40 lawsuits filed by wealthy art collectors, Wall Street financiers, artists’ estates, and galleries in Europe and the United States accusing Larry Salander of a stunning array of misdeeds, including theft, fraud, and forgery.

Among those who sued was Roy Lennox, the senior managing director of the $11 billion hedge fund Caxton Associates, who alleged that Salander owed him $3.8 million for a series of art investments that Lennox would call “nothing more than an illegal Ponzi scheme.” Saundra Lane, a Massachusetts art collector, claimed that Salander had not made $3.4 million in payments for a Charles Sheeler painting he had purchased from her and that some of the collateral he had given her in return—two Albert Pinkham Ryders and two James McNeill Whistlers—were possibly fakes. Earl Davis amended his suit against Salander, claiming after an investigation that the dealer owed him more than $30 million for 96 works by his father that Salander had either lost or sold without Davis’ permission. Myron Kunin, the billionaire founder of the hair-care conglomerate Regis and a noted collector of works by American Modernists, sued, claiming that Salander owed $3.8 million in unpaid loans and $3.5 million for a Georgia O’Keeffe painting that Salander had not fully paid for. The contractor who had renovated Salander’s East Side townhouse sued, as did the landlord of his old gallery on East 79th Street, the landlord for his new gallery, as well as Bank of America and Sotheby’s. The most damaging suit, however—the one that resulted in the shuttering of Salander’s gallery—was filed by Donald Schupak, the chairman of Triumph Apparel, who alleged that Salander had “swindled” about $42 million worth of Baroque and Renaissance art from Renaissance Art Investors, a partnership the two men had formed in the spring of 2006. In early November, telling the court that Schupak’s allegations in particular were “false” and that he believed he had “extremely valuable personal assets and holdings that, if sold in the proper manner, should be sufficient to satisfy all legitimate claims,” Salander and his wife, Julie, filed for personal bankruptcy. The gallery followed suit—at which point yet more claims surfaced, most notably from Salander’s lead creditor, the San Francisco-based First Republic Bank, whose lawyers would tell the bankruptcy court that Salander was in default on more than $40 million in loans.

If the allegations are true, the collapse of Salander-O’Reilly would be among the most massive art frauds in history. All told, more than $100 million in art, bank loans, and client investments appears to have vanished into thin air. The scandal has shaken the art world, raising troubling questions about the darker side of this secretive, totally unregulated market into which investors have poured billions of dollars in the past decade. Today, as a federal bankruptcy judge sorts through the tangled web of claims against Salander, and an investigation, begun in late October by the Manhattan district attorney, raises the possibility that Salander will face a criminal indictment, the question that mystifies is not just how Salander got himself into so much trouble, but why? What caused a man who had achieved so much to risk everything he had worked so hard to create, “to destroy,” as one of his artists says, “everything that he loved?”

That Larry Salander could have gotten into so much trouble over money is something that many of his closest friends would never have imagined, because money never seemed to be what drove him. His great passion, almost to the point of obsession, was not the business of art but art itself. A painter of some note, whose 1992 work Crucifixion is part of the Smithsonian’s collection, Salander had an almost childlike exuberance about art—“a tremendous enthusiasm,” says the New York dealer David Tunick—that people could sense just on meeting him. A big man, often dressed in his trademark T-shirts and baggy suits, Salander could be charming and gracious, like so many New York dealers, but he had an intensity and a bluntness, an unvarnished quality that set him apart. A man of strong emotions, he would speak about creativity and art in transcendent terms; the great masterpieces, he sometimes said, were the clearest proof that God existed. Salander loved art for its intrinsic beauty, its “aesthetic,” says Resika, as opposed to its place in art history or its price. This, many say, was reflected in the eclectic range of his gallery’s exhibitions. He would show contemporary American work one month, followed by an exhibition of Constable paintings and then Houdon sculptures.

What Salander would never allow in his gallery, however, was the art that is in so much demand today—the Pop art, conceptual work, avant-garde pieces, and celebrity productions whose prices have been driven to dizzying heights in the past several years by an army of new collectors. Damien Hirst, Jeff Koons, Jean-Michel Basquiat, Richard Prince—these were among the artists whose work Salander openly disdained. A classicist at heart, he regarded much of the new art as gimmicky and slick, as art created only for money. Such works, Salander felt, were “no longer about art,” says the sculptor Michael Steiner, “but about the people who buy art.”

In the past 20 years, since art-market prices first began to spike in the late 1980s, the kind of people who buy art has slowly evolved. While there have always been investors with extremely sophisticated taste who take the time to educate themselves about the art they buy, an increasingly large segment of investors has not bothered with connoisseurship and has simply bought art that was in vogue and likely to turn a profit. In the past six years, as the art market has exploded, this trend has become even more pronounced.

With torrents of money flowing in from newly rich American hedge fund managers, Russian and Asian oligarchs, and investors from the Middle East, auction prices for art started to go through the roof. The Impressionists, Post-Impressionists and Moderns were the first to go. And then, partly because of the growing scarcity of paintings from those periods and partly because of the tastes of the wave of new buyers, demand turned to contemporary works. While many in the art world lament the current state of the market, for Salander it was almost a moral offense that masterpieces by artists like Corot or Courbet were selling for less than a million dollars, while a shark in formaldehyde by Damien Hirst was fetching $12 million, a Balloon Dog sculpture by Jeff Koons could command $19 million, and Basquiat’s stick-figure paintings could go for nearly $15 million. “He was outraged,” Steiner says.

It was partly this outrage, people say, that led Salander to make his first foray into the market for Baroque and Renaissance art sometime around 2001. “Here were all these rich Americans buying the stupidest things around,” says one friend, “and with old masters, you could have real paintings for a fraction of the price. He was a great salesman, and he thought he could convince them. But it was a gamble.” With the exception of the rare sale of a work by a top artist—a Tintoretto, for example, a Canaletto, or, rarer still, a Caravaggio—the business in old masters had become relatively lackluster.

Selling old masters also had its perils—most notably what the dealer David Tunick calls “the shifting sands of attribution.” The provenance of most works has grown very murky over the centuries, and it requires experience and scholarship on the part of dealers to distinguish a real masterpiece from a work by an artist’s followers or an outright fake.

But none of this seemed to daunt Salander. He set about hiring some of the top scholars in the field and, in 2002, stunned the art world with his first major purchase. At Sotheby’s London old-master auction that July, his gallery paid $3.2 million for a terra-cotta figure attributed to Bernini, the sale price of which had been estimated at $250,000.

What Salander had set out to do, people say, was to create, in effect, an entirely new market for old masters. And he was utterly convinced that he would be able to make it happen. But his motive, some say, was not just his passion for art. He’d seen the effect that the cascade of new money was having on the market, how the power was shifting to contemporary dealers like Larry Gagosian, who worked the moneymen so well. And Salander was tempted, some say. It wasn’t the money but his ambition that drove him, friends say. There was no question that art was his great love, but his other passion, and perhaps the stronger of the two, was his desire “to be the greatest, the most important, dealer in the world,” says one prominent artist. “Larry talked about it openly, and you could also feel that was his idea. It just radiated off him.”

Raised in Long Beach, New York, Salander came from a family of dealers. His grandfather and uncle owned a small shop on Madison Avenue that sold antiques, and his father ran an antique-furniture dealership on Long Island, where Salander worked throughout his youth. It was not an easy business in which to earn a living, and though the Salander family lived well, they were far from prosperous. Salander was 20 in 1969 when his father died and he was forced to drop out of the University of Miami to help his family make ends meet. For several years, Salander ran his father’s store, until 1972, when he opened his own furniture and antiques shop in Wilton, Connecticut. The following year, he opened a second antiques store in Manhattan, where he also began to sell works of art.

In 1974, Salander teamed up with William O’Reilly to form the Salander-O’Reilly Galleries, which quickly established itself as a dealer of some distinction, focusing on 19th-century European art, American Modernism, and contemporary works. While O’Reilly was charming and highly knowledgeable about art, people say that of the two men, Salander was the “income earner.” He was driven, focused, and, like many of the best dealers, had a “razor-sharp memory,” as a former employee puts it. Information about collectors, rumors about which artworks might be coming to market, sale prices, details of deals—he kept it all in his head, rarely needing to put anything in writing. He was also a consummate salesman, patient and subtle, with an acute, almost intuitive understanding of his clients’ emotional needs and desires.

Salander’s ambitions eventually began to eclipse those of his partner, and in 1991, he agreed to buy O’Reilly out. By then, Salander had moved the gallery to elegant new quarters at 20 East 79th Street, renting three floors for $58,333 a month in a huge mansion owned by Elaine Rosenberg, the daughter-in-law of the renowned French art dealer Paul Rosenberg.

After the buyout, the widespread impression in the art world was that Larry Salander was making it on his own. What virtually no one knew, however, was that in February 1995, Salander took on a new partner, Curtis Galleries, in a deal that would remain secret for nearly 12 years. The owner of Curtis Galleries was Myron Kunin, perhaps the most important private collector of American Modernist art, and the deal effectively gave him 50 percent of Salander-O’Reilly. The agreement attested to Salander’s prowess as a negotiator: Though Kunin got half of the gallery’s profits, Salander in return got financing; the right to run the gallery’s business with virtually no interference, involvement, or oversight from Kunin; and an annual salary of $500,000. It was a remarkable arrangement, one that stunned those who worked with Salander when they learned of it last summer.

Salander’s reasons for “selling half of himself,” as one friend puts it, may have stemmed in part from personal pressures. His first marriage had collapsed; there was alimony and support for three children to pay. A year after the deal with Kunin was signed, Salander married his second wife, Julie, a director at the relief agency CARE who was 15 years younger than he was and with whom he would have four more children.

By 2002, Salander had begun his move into old masters; his staff was expanding and would soon reach an impressive count of 50 employees. By all indications, Salander was doing well financially. He and Julie maintained an estate in the wealthy upstate New York enclave of Millbrook. He was traveling frequently to auctions and meetings in Europe, and one of his artists recalls, it was around this time that he began hiring private jets for his business trips. In July, he would buy the $3.2 million Bernini.

Larry Salander first met the hedge fund manager Roy Lennox around the beginning of 2002. A year later, according to Lennox, Salander offered the financier the first of what would be 11 “business propositions.” He told Lennox that he had a buyer willing to pay $1.2 million for a painting by Corot that Salander did not yet own but said he could buy for $800,000. Salander offered Lennox a 50 percent share in the painting. If Lennox gave him $400,000, Salander promised that within a year he would repay Lennox $625,000, a profit of more than 50 percent. Lennox agreed to the offer, and in January 2004, Salander paid Lennox as promised.

During the next three years, the two men would do 10 more deals, totaling more than $5 million, for works including a sculpture by Santi Buglioni, a stucco relief by Desiderio, and paintings by Marsden Hartley, Stuart Davis, Arthur Dove, and Francisco de Goya. These deals all had the same structure: Salander would promise Lennox a share in the profits from the sale of an artwork that was yet to be purchased. Lennox never took title to the works, never saw them, and apparently never asked who the buyers were. For Lennox, the deals appear to have been done solely for the potential profit. But the returns Salander promised were huge—in the case of Sun and Moon, by Dove, a remarkable 40 percent in just under four months.

Agreements such as these are not uncommon in the art world. Dealers will sometimes turn to collectors or to one or two trusted investors in order to help them buy art. What was unusual about the Lennox deals was the expected profits, the frequency of the investments, and, ultimately, the fact that Lennox kept investing in deal after deal despite the fact that Salander soon stopped paying him the money promised. Skyrocketing art prices may have made anything seem possible. Or Lennox may have trusted Salander because they’d become friends.

In the fall of 2004, Salander threw a 40th birthday party for his wife at the Frick museum. Friends were surprised when they arrived for what they thought would be a small dinner and found that Salander had rented the entire place for a lavish affair with about 400 guests. The impression at the time was that the party was thrown, in part, to impress the wealthy Wall Street financiers and collectors that Salander was trying to woo as clients for his burgeoning old-masters business.

Soon after the Frick affair, Salander signed the lease on what would be his new gallery, on East 71st Street. Still paying rent of $58,333 a month for his space on 79th Street, he now owed an additional $154,166 a month in rent for his second place. On top of that, he hired the architect Andrew Bartle to renovate the 71st Street mansion. That summer, Salander had also bought himself a $4.75 million townhouse on East 82nd Street, something that few of his friends knew, and he was paying nearly $3 million to have that renovated as well. When one close friend learned about the townhouse, he was surprised by the extravagance. “Something changed in Larry’s life that year,” he says, “and it wasn’t just about the art.”

At exactly what point Larry Salander may have crossed the line and begun to deceive his clients, as they allege, is hard to say for certain, but by the end of 2004, there were signs of trouble. According to court records, he had stopped making payments on the $3.1 million he owed to the Canadian press baron Kenneth Thomson for a Charles Russell painting, claiming that the buyer of the work was refusing to pay—although Thomson’s estate would later allege that Salander already had the buyer’s money. He was also involved in a dispute with Dougall Arts, a London dealer, over payments he was refusing to make on a 16th-century sculpture of Saint Jerome, which he had bought from the dealer and, according to Dougall’s assertions, had already resold. And sometime in 2005, Earl Davis began to suspect that Salander was selling Stuart Davis paintings and pocketing the proceeds without telling Earl—a betrayal that friends say, if it indeed happened, is particularly shocking, because Earl had known Salander from childhood and, says one, “trusted him like an uncle.”

Salander’s new gallery on 71st Street opened in September 2005 to much public and press acclaim. By then, although few people knew it, Salander was in serious financial trouble. Unable to pay Elaine Rosenberg the full rent on his 79th Street gallery, he’d made a deal to effectively reduce it by $43,750 a month, but he was still in arrears. He was also borrowing money from the contractor working on his townhouse. And in July, without offering any explanation, he’d stopped making payments on his buyout arrangement with his former partner, O’Reilly, who sued Salander for $148,000 the week after the gallery’s opening. Salander’s facade, though, was that of a very prosperous man. In 2005 alone, he bought five vehicles, including a Cadillac Escalade, a Lexus 330 S.U.V., and a Denali truck.

Still, among art financiers and dealers, the opulence of the new gallery raised questions. “To go and put money out in inventory or real estate in speculation that there will be a market one day requires a tremendous amount of financial muscle,” says Richard Feigen, a prominent New York dealer. “If you go and occupy an enormous place, then the assumption is that you have a tremendous amount of backing, and if people think that you don’t, then people are going to say you are overreaching or in trouble.”

Apparently intended to impress the new-money collectors, the 71st Street gallery was sumptuous, almost on the scale of the palazzo-like gallery in Paris owned by the Wildenstein family. But the Wildensteins, with a collection believed to be worth $5 billion, are the richest art dealers in the world and have been amassing works for more than 100 years. Feigen, for one, was baffled because he felt that at that point there wasn’t enough high-quality inventory available in the market for Salander to fill his vast new space. An art collector who was taken aback by the lavishness of the new gallery remembers asking one of Salander’s top employees, “What the hell is going on there?” He was told that no one really knew but that Salander hadn’t been paying his top staff the commissions that he owed them.

In April 2006, unaware of the rumors in the market and the lawsuits against Salander that had begun to trickle into the courts, Donald Schupak invested $15 million in Salander-O’Reilly. Somehow, Salander had managed to convince the financier that big money could be made by selling Renaissance and Baroque art to hedge fund managers and other newly wealthy collectors. As part of their agreement, the two men formed Renaissance Art Investors, an investment partnership whose goal was to develop that market. With Salander at the helm, the partnership would acquire undervalued old masters, find wealthy buyers, and resell the art at a massive profit, which would be split between Schupak and Salander. In addition to Schupak’s $15 million, Renaissance Art Investors was also financed by a loan of about $15 million from First Republic Bank. Salander’s contribution to the initial capitalization of the partnership was the title to approximately 300 works of art. With his investment, Schupak believed he had become the owner of Salander’s entire portfolio of Renaissance and Baroque art, which, through swapping, trading, and purchases over the next year, would grow in number to more than 600 works, according to Schupak’s lawyer, Barry Slotnick.

The question of how to prove ownership would eventually become a problem, however. In the art market, which functions on trust and handshakes, without any regulation or institutional oversight, the only proof of ownership is the title to the work. But even that offers no guarantee. Unlike the real estate market, for example, there is no title insurance and no legal title registry for artworks, and titles can be forged or copied and given to multiple buyers. To protect their ownership in works of art, banks, dealers, and some sophisticated investors will register pieces they have claimed as collateral with a public document called a Uniform Commercial Code filing, or U.C.C. The dealer Richard Feigen notes, however, that for many in the art world, filing a U.C.C. “would be highly awkward, really almost an insult.” And even U.C.C.’s have their limits, as Schupak would later discover, when, according to his lawsuit, he found that many of the works purchased by R.A.I., though noted in extensive U.C.C. filings, were either not Salander’s to sell in the first place or were sold by the dealer behind Schupak’s back.

Saturn Abducting Philyra, by Parmigianino, is alleged to be one such work. At the time that Schupak “bought” it from Salander, the painting was actually owned by the New York dealer Stanley Moss. Salander had arranged to buy it from Moss for $1.5 million but had not paid for it when, in April 2006, he included it as part of his contribution to R.A.I. with a stated value of $1.75 million. That February, according to Moss, while Salander was still negotiating the R.A.I. deal with Schupak, he asked Moss to withdraw his U.C.C. filing on the work. When Schupak checked the public record, there was no way he could tell that the Parmigianino was, in fact, still owned by Moss. In May, after R.A.I. had taken title to the work, Salander told Moss that he could refile the U.C.C.

It was, if Moss’ account is correct, a clever maneuver. Schupak, however, was not a man to trifle with. He was a tough dealmaker who did not shy away from a fight, as his Porsche dealer discovered in 1986 when Schupak hired someone to picket the shop every day for a month in a dispute over a repair bill. It was Schupak who would bring Salander down, demonstrating that in a confrontation between art and money, the money would win.

By the end of 2006, according to bank documents, Salander was “in multiple default” on nearly $50 million in loans from First Republic. These included the $15 million loan to R.A.I., a $14 million mortgage on his townhouse, and a $26 million line of credit to the gallery. How and why First Republic had gotten itself in so deep with Salander was something that baffled other bankers. “You have dealers with $1 million, $5 million, maybe $10 million bank lines, but $50 million is off the charts,” says one lender.

People now speculate that First Republic, which catered to high-net-worth individuals, was trying to expand its business and got in over its head in the art market, in which it had little expertise. Indeed, in its 2005 annual report, the bank, which was acquired by Merrill Lynch for $1.8 billion in September, touted Salander as one of its best clients. But by the end of 2006, the Salander-O’Reilly Galleries had a new C.F.O., Antonette Favuzza, who many people believe was installed by the bank to monitor what had become a seriously troubled credit. This move, along with other events that suggested First Republic was aware of Salander’s problems, later raised questions among creditors about the bank’s culpability. It was a point that Earl Davis’ lawyer raised in court in November, when he told the bankruptcy judge that creditors might have “possible claims against the bank for aiding and abetting a fraud.”

By the spring of 2007, Salander was bouncing checks for hundreds of thousands of dollars on his First Republic accounts. In April, Myron Kunin notified Salander that he would terminate their partnership that fall because he had not received any financial statements for months and because Salander had not paid him in full for the O’Keeffe painting Shelton Hotel. It is not clear whether First Republic even knew about Salander’s partnership with Kunin. Artists and one employee say that Salander was secretive about his business dealings. But the bank should have known about Salander’s ongoing problems with Saundra Lane, the collector who claimed that he still owed her $3.4 million for a Charles Sheeler painting; in April, ruling on Lane’s behalf, a Massachusetts judge issued an injunction against Salander essentially forbidding him from spending any gallery money without Lane’s approval.

And yet throughout 2007, First Republic continued to lend Salander money, as did Sotheby’s, that summer, although the auction house was aware that Salander was in serious financial trouble. Sotheby’s made three loans to Salander, for a total of $863,650, against a group of artworks he had consigned for auction. Such loan advances, along with large sale-price guarantees, have become increasingly customary among the auction houses in the superheated art market. What was different about the deals with Salander, however, was that he never got the money. As part of an agreement between First Republic and Sotheby’s—which was eager to keep the works for sale at auction—the money was paid to the bank instead. When asked about its relationship with Salander, its role in selecting Antonette Favuzza, and whether it was aware of the gallery’s problems with Saundra Lane and Salander’s partnership with Kunin, First Republic declined to comment, as it did when asked whether its executives considered warning other creditors of Salander-O’Reilly’s financial condition and about the suggestions by creditors that it might face claims for aiding and abetting a fraud.

Donald Schupak was leafing through Sotheby’s catalog for its old-masters sale last June when he came across a number of works that belonged to Renaissance Art Investors. Stunned because Salander had not told him he was putting the works up for sale, Schupak said nothing to the dealer but sent an associate to the auction. The pieces sold, but Salander never mentioned the sale to Schupak.

On July 19, Salander was summoned to Schupak’s office, where he was confronted by Adam Deutsch, a private investigator Schupak had hired, who, according to an affidavit, interrogated the dealer about “inconsistencies uncovered by R.A.I. in the prices Salander represented he had paid for certain works of art that he sold to R.A.I.” and evidence that he had sold R.A.I. works and not paid the art investment partnership. In late July and again in early August, Schupak’s investigator came to the gallery to interview employees and later alleged that in the week between those meetings, computer records relating to R.A.I.’s artworks were deleted.

In August, the deluge began. On August 7, Myron Kunin sued Salander through his holding company, Curtis Squire, alleging that Curtis Squire had been the victim of “Salander’s shell game” and “gross mismanagement.” On August 29, Roy Lennox sued Salander. On September 24, R.A.I. filed its suit. More complaints would flood the courts in the coming month.

And things would get worse. In early October, Schupak paid a visit to Alexander Acevedo, a New York gallery owner from whom Salander claimed he had bought works for R.A.I. But when Schupak showed Acevedo the invoices from these deals, Acevedo said they were forgeries. Two days later, Schupak had Salander served with a temporary restraining order, forbidding him from selling, transferring, or consigning any artworks. Desperate, Salander tried to settle with both Schupak and Lennox, offering them art, money, jewelry—and, in Lennox’s case, a portion of Salander-O’Reilly’s art library—if they would withdraw their lawsuits. According to Schupak, on the afternoon of Salander’s offer to settle with R.A.I., a truck showed up at the gallery to deliver a Matisse painting and was then loaded with several works owned by R.A.I., which, Schupak alleges, Salander had traded for the Matisse. Where the art was taken is still not clear. In the end, it was Schupak’s attorney who, in an impassioned courtroom plea, persuaded the judge to issue the order that resulted in the shuttering of Salander’s gallery on October 19.

Denying that he cheated anyone, insisting, “I’ve always paid my bills,” Salander blamed his fall on Schupak and almost everyone else he’d done business with. In a court filing, Salander claimed that he was the victim of Schupak’s “personal vendetta.” He also lashed out verbally at “people I thought were my friends” and “people who I made a lot of money for”—all of whom had “betrayed” him, “lining up” to take advantage of him when he was weak. “It would have been easy for me to get angry over your taking legal action,” Salander wrote to John McEnroe, who had interned at the gallery in 1993 and is the godfather of one of Salander’s children. “I only feel sad.... You chose to let some asshole liar take advantage of what all people who buy art are terrified of: being taken advantage of,” Salander continued. “You have listened to rumors and innuendo.... You listened to everyone but me.”

Today, Larry Salander’s battle with his creditors has grown even more bitter. As the bankruptcy proceedings grind on, as the art is being cataloged, its snarled ownership sorted out by a court-approved specialist, Salander has drawn the ire of his leading creditors through his repeated attempts to remain involved in the gallery’s affairs. Calling his efforts to be hired to help in the gallery’s liquidation “offensive,” “outrageous,” and even “extortionate,” Salander’s creditors, in an angry torrent of legal filings, say he is withholding information about what happened to their art and their money, while he tries to secure a salary. So far, the judge has allowed Salander to keep the 66-acre estate in Millbrook, but the court has forced him to sell the New York townhouse, which went on the market for $25 million.

According to his lawyer, John Moscow, Salander claims that as best he knew from the gallery’s financial statements, Salander-O’Reilly was showing a profit as late as October 2006. Whether or not this turns out to be supported by the gallery’s records, which are now in the hands of the district attorney, those close to Salander say that he appears to have genuinely believed right up to the end that the “Masterpieces of Art” exhibition was going to make everything all right. He would be able to pay off all his debts with profits from the show, particularly from the Caravaggio that would be offered for $100 million. “The level of denial was amazing,” says one friend. In fact, the Caravaggio might have sold for only a fraction of that price, if at all, because its attribution was in dispute. Last sold by Sotheby’s in 2001 for $110,000, it was painted, many experts believe, not by Caravaggio but by an artist who was in the master’s circle. As with a so-called Donatello that Salander gave Lennox at one point in an attempt to settle his debt and the purportedly fake Ryders and Whistlers he gave to Saundra Lane, friends are almost certain that Salander did not knowingly trade in fakes or intentionally misattribute masterpieces. He believed that these works were genuine, says Michael Steiner, “because he needed to believe.”

Most people who know Salander well doubt that he set out to cheat anyone. The portrait they paint is of a man who did much good for art and for artists—tirelessly promoting them, giving up his commission on sales of their work when they needed money, lending emotional support—but who was overpowered by ambition and hubris. When he first slipped no one is sure; perhaps it was in early 2004, when he saw how easy it was to delay payments for the Charles Russell he bought from Kenneth Thomson, the press baron. Maybe he was taken in by the justification that the money would go to building a business of great value, expanding the market for the world’s most extraordinary works of art. Then one thing led to another, the debts piled up, and the bills came due, and as he sold paintings he didn’t own and sold others to more than one buyer, he told himself he was just buying time. He would pay everyone off with the proceeds from his October exhibit, a show so magnificent that it would be a testament to the correctness of his vision. Then everyone would understand that something bigger than their art or their money was at stake. In early June, although Resika and Steiner did not yet know it, Salander had signed an agreement giving their work, worth some $2.4 million, to the Benucci gallery in Rome, to settle a debt and to get a Matisse painting that he coveted. Yet in August, Resika recalls, Salander sent him a letter: “I will get all your pictures from Rome,” the dealer wrote. “But God forbid, if I can’t get them back, is it worth our friendship?” In October, unwilling to sue their old friend, Resika and Steiner instead sued the Benucci gallery for the return of their art.

It is possible, says the dealer Richard Feigen, that one day Salander may be proved right—that hedge fund managers and the wave of new collectors will indeed start pumping their money into Renaissance art—but that day is probably a long way off. Salander’s mistake, says Feigen, was to invest so heavily in a market that did not yet exist. But many people were seduced by Salander’s business plan, and even sophisticated investors like Schupak did not see its flaws. That may have been in part because Salander was so compelling, so fluent in the languages of art and business, so passionate, and so easy to like despite the damage he has done to so many people. Even among the clients who say they were defrauded, the artists whose work went missing, and the dealers who say that his actions may have hurt their business by heightening distrust of dealers generally, there is a tremendous feeling of “sadness,” as one colleague put it. Salander was, after all, a man who tried, someone who put everything he had on the line for his business and for art. That he discovered his dark side in the process is probably something that many people can relate to. And regret. “I would have given him my art to help him, if he’d only asked,” says Steiner. “He was very good to me; he was my friend, my Icarus.”