In diamond industry the frauds are possible due the dependance of the market players on bank’s loans. And the story of Nirav Modi, arrested in London in March 2019, is one of these.
Celebrity jewelry designer Nirav Modi, coming from a family of diamantaires, was born in India, but grew up in Antwerp. After drop out of the college, Modi joined his family in diamond business and started to import duty-free cut and polished diamonds to the domestic market while sending low-value diamonds for making export jewellery. His brand Firestar Diamonds became one of the most reputable across three continents with stores in London, New York, Las Vegas, Hawaii, Singapore, Beijing and Mumbai.
In January 2017 the Income Tax department of India raided over 50 offices of Modi and found cash and jewellery that allegedly revealed tax evasion of Rs 500 crore ($5 bln) by Modi’s firms. But that was just the beginning. Soon the State-owned Punjab National Bank has filed a complaint, accusing Modi and his firms of fraudulent transactions worth Rs 11,000 crore ($110 bln) — nearly one third of the PNB’s net worth for financial year 2017.
It was later revealed that two of the bank’s employees helped Modi by issuing fraudulent letters of undertakings (LOUs). The bank stated that accused firms presented a set of letters of undertakings with a request to allow buyers’ credit for making payments to overseas suppliers. No need to say, Nirav Modi was not going to refund these money.
Nirav Modi is now arrested. But how many more Modis are out there today, serving the inflated inclosed diamond market needs?
With Diamond Market opened these scams will forever be history.