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Firestar Diamond – Examiner’s Report Details “Numerous Indicia of Fraud”

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August 25, 2018 – Firestar Diamond’s Examiner filed with the Court a report on the case [Docket No. 394]. The reports “Executive Summary” notes in part, “The Debtors are in the business of selling finished jewelry to major retailers, including Costco, J.C. Penny, Army/Navy Stores, Macy’s and Zales, among others. The Examiner has uncovered that in addition to conducting their stated wholesale business, the Debtors conducted transactions totaling hundreds of millions of dollars with the foreign shell companies alleged to have been created and secretly controlled by Modi for the purpose of furthering the fraudulent banking scheme (the “Shadow Entities”). These transactions were primarily structured as purchases and sales of loose diamonds, at a volume and in a manner that is not consistent with the stated business of the Debtors. In the limited time available, the Examiner has identified tens of millions of dollars of purported diamond sales by the Debtors to various Shadow Entities, where payment can be traced to proceeds from the alleged bank fraud. The Examiner’s investigation has confirmed that criminally derived proceeds from these sales flowed from India into the U.S. and in numerous instances were returned to Firestar in India or used to fund Debtors’ operations, including making payments on loans made by banks in the U.S. In addition to linking the Debtors’ transactions to specific Letters of Undertaking (LOUs), the Examiner has identified numerous indicia of fraud involving the Debtors’ financial reporting, inventory valuation, and operational practices surrounding these transactions.“

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