Three bankrupt US firms with “direct” links to the Indian billionaire Nirav Modi were involved in transactions related to an alleged multibillion-dollar international scheme for which Modi has been charged by Indian authorities, according to Bloomberg. The firms sought protection from creditors earlier this year as the celebrity jeweler’s empire quickly unraveled. In February, the Punjab National Bank, India’s second-largest state lender, reported that the Indian billionaire had siphoned billions of dollars from its coffers.
John J. Carney, an examiner appointed by the US bankruptcy court, found “substantial evidence” that officers at Firestar Diamond Inc., A. Jaffe Inc., and Fantasy Inc., knew about the scheme alleged by Indian officials, according to the report filed Saturday. The Examiner uncovered millions of dollars of diamond transactions by various shadow entities owned by Modi, where payment can be traced to proceeds from the alleged bank fraud, the report said.
According to Carney, a three-carat gem was FedEx’d around the world between shadowy entities allegedly controlled by the Indian billionaire in 2011. The accounting practice of round-tripping, also known as round-trip transactions or “Lazy Susans,” was paramount to the biggest bank fraud in Indian history and charges by the Indian government against the celebrity jeweler.
During the course of the fraud, Modi “fraudulently borrowed approximately $4 billion over a period of years by manufacturing sham transactions purportedly to ‘import’ diamonds and other gems into India using a web of more than 20 secretly controlled shell entities,” Carney said in the report.
Bloomberg provides a summary of how Modi roundtripped diamonds through his various companies:
“The “fancy vivid yellow orange cushion cut” diamond was first sold by Firestar Diamond Inc., a U.S. company indirectly owned by Modi, and shipped to Fancy Creations Company Ltd., a foreign shell company in Hong Kong also allegedly controlled by Modi, in August 2011, the report says. The price was almost $1.1 million.
The colorful stone was then shipped out two weeks later by Solar Export, a partnership formed by the Nirav Modi family trust, back to Firestar Diamond in the U.S., for closer to what it was really worth: $183,000, the examiner wrote.
Less than a week later,