After graduating from high school at the German k. k. Gymnasium in Brno in 1899, Franz Friedrich Grünbaum came to Vienna to study law. He took only one of the three state examinations, however, and embarked instead on a career as an actor, librettist and cabaret artist. After attracting attention in 1906 as an impromptu stand-up comedian at Café Griensteidl, he appeared at various venues in Vienna and Berlin and became one of the most popular and successful cabaret artists of his time. From the beginning he was famous for his quick-witted responses to antisemitic attacks. In 1919, having taken Austrian nationality after the end of the monarchy, he married Elisabeth Herzl, called Lilly (born 28 April 1898). It was his third marriage which, like the other two, remained childless. The Grünbaums lived from 1922 at Krugerstraße 5/III/11 in the 1st district and from 1926 at Rechte Wienzeile 29/III/11 in the 4th district. In the days following the annexation, Grünbaum became a target for the Nazi authorities, which he had repeatedly attacked with his satire in the years before. After a last appearance with Karl Farkas on 10 March 1938 at Kabarett Simpl, he was banned from performing there. That evening, Fritz and Lilly Grünbaum attempted to flee by train with Hermann Leopoldi to Czechoslovakia. As the Czechoslovak parliament under Edvard Beneš had just ordered the border closed to refugees, they were sent back to Vienna. Although Lilly Grünbaum's brother Maximilian Herzl (1878–1946), who lived in Antwerp, obtained a Belgian residence permit for his sister and her husband, they were unable to leave the country because Fritz Grünbaum was arrested in May 1938 and detained in the police prison on Rossauer Lände, and then in a school in Karajangasse converted into a prison. Future federal chancellor Bruno Kreisky was one of his fellow-detainees. Following the triumphant headline in the Völkischer Beobachter "We've got Grünbaum!" he was transported to Dachau concentration camp on 24 May 1938. He was already badly beaten up on the journey. On 23 September he was transferred to Buchenwald, where he was in the same block 17 as Fritz Löhner-Beda and Robert Danneberg. Max Herzl, who had meanwhile helped his sisters Anna Reis (1882–1948) and Mathilde Lukacs to flee to Belgium with their husbands, continued to attempt to obtain an entry visa for Fritz and Lilly Grünbaum, but the file was closed when war broke out. Fritz Grünbaum was returned to Dachau on 4 October 1940. He survived a suicide attempt but died shortly afterwards on 14 January 1941. His wife's efforts and those of the journalist Willy Schlamm and the writer Friedrich Torberg to free him were unsuccessful. Lilly Grünbaum is thought to have been murdered in Maly Trostinec with her friend Elsa Klauber, with whom she lived after Fritz Grünbaum's internment in concentration camp.

Fritz Grünbaum, whose father had been an art dealer in Brno, had an impressive art collection, containing several hundred works—drawings, etchings, engravings, book miniatures, etc.—which have not all been precisely identified today. Some acquisitions from the Wiener Künstlerhaus, including works by Käthe Kollwitz and Albin Egger-Lienz, in the early 1920s have been identified. Their whereabouts and those of the drawings by Edgar Degas, Jozef Israëls and Adolf Menzel illustrated in Die Bühne in 1925, and Max Oppenheimer's oil painting Horn Quintet, which Grünbaum also owned, are unknown. He also collected works by Egon Schiele, which he made available for exhibitions, including one at the Vienna Galerie Würthle in 1925/26 or for the Hagenbund exhibition with the Neue Galerie commemorating the tenth anniversary of the artist's death in 1928. Grünbaum's collection was mentioned in Marcell Klang's reference work Die geistige Elite Österreichs: "The artist has an interesting and valuable collection of graphic artworks, including an extensive collection of drawings and watercolours by Egon Schiele and drawings by the French Impressionists." The collection was also known to the jurist and art collector Walther Kastner, who wrote in his memoirs that he had once been able to view it.

In accordance with the Verordnung über die Anmeldung des Vermögens von Juden (Regulation on the Declaration of Assets of Jews) of 26 April 1938, the collection was inventoried on 20 July 1938 in Grünbaum's apartment and evaluated by the art historian Franz Kieslinger. According to his expert opinion the collection, valued at 5,791 Reichsmarks, contained sixty-eight lots with over 400 works by Old Masters and modern artists. Eighty-one works by Egon Schiele, including five oil paintings, are included in this list, along with two large drawings and other non-specified works by Oskar Kokoschka, prints by Gustave Doré, Auguste Rodin, Edgar Degas, Carl Spitzweg, Moritz von Schwind, Adolf Menzel and Jozef Israëls, etchings by Rembrandt, engravings by Albrecht Dürer, and more. The collection appears again in an application on 8 September 1938, made by the transport company Schenker & Co on behalf of Elisabeth Grünbaum. The request was granted and an export authorization valid for three months was issued. It may be assumed, however, that the collection did not cross the border, since there is no customs confirmation attached to the document. As Elisabeth Grünbaum did not wish to leave without her husband, she apparently allowed the export authorization for the pictures to lapse. The art collection was mentioned once again in Fritz Grünbaum's asset declaration of 30 June 1939, in which the remaining assets had been drastically reduced, because his wife had paid all of the discriminatory levies by selling items from it. Her own assets had also shrunk considerably. On 31 January 1939, Ludwig Rochlitzer, the administrator commissioned by the foreign exchange department in Vienna, invoiced her for the sum of 6,500 Reichsmarks, made up of his fee and that of the lawyer Alexander Bayer and overheads. The item "shipment costs with the transport company" could mean that the artworks were collected from Schenker & Co. Elisabeth Grünbaum might have recovered the works, which would explain why there is no evidence of their sale by Vugesta. After June 1939, the art collection no longer appeared in the list of assets.

It is still unclear today what happened to the collection and how parts of it remained intact until after 1945. Elisabeth Grünbaum must have either sold the works in secret and/or given them to someone for safekeeping. After the war, between 1952 and 1956, a total of 113 works from Grünbaum's collection were sold by Lilly Grünbaum's sister Mathilde Lukacs through Galerie Kornfeld in Bern. The precise circumstances of how and when they came into her possession are unclear. Lukacs escaped in August 1938 with her husband to Belgium, and she remained in Brussels after the war. When she sold the works, she had not been appointed by the court as the heir to the art collection or Fritz Grünbaum's estate. According to the death notice in 1941, no probate proceedings took place because there was no estate, and Fritz and Elisabeth Grünbaum's estate did not therefore devolve to Mathilde Lukacs.

In November 2010 the advisory board of the Leopold Museum Privatstiftung determined that three works by Egon Schiele, including Dead City III, which had been seized immediately after the Schiele exhibition at the MoMA in New York, did not come under Section 1.1 of the Art Restitution Act as there was no indication that the collection had been expropriated by the authorities between 13 March 1938 and 8 May 1945. Moreover, the Art Restitution Advisory Board was unable to demonstrate that two drawings by Egon Schiele sold by Mathilde Lukacs in the 1950s through Kornfeld and now in the Albertina had been expropriated by third parties. As Elisabeth Grünbaum's sister, Lukacs was among her legal heirs (and hence also of Fritz Grünbaum) and the transactions were not expropriations within the timeframe of the 1946 Nullity Act. In 2022, by contrast, the Supreme Court of the State of New York confirmed its original 2018 court decision sustaining the claim by Grünbaum’s heirs against the art dealer Richard Nagy for return of two works by Schiele also from Fritz Grünbaum’s collection.