The findings of the examiner in the US court, in the 171-page report, has not only identified supposed diamond sale transactions by Nirav Modi’s three US companies where payments can be traced to proceeds from the alleged PNB bank fraud, but has also chronicled the use of these fraudulently-obtained funds.

Firestar Diamond Inc, A Jaffe Inc and Fantasy Inc, the three entities in question – controlled by Nirav Modi – had filed for Chapter 11 bankruptcy protection in the US, after the massive fraud came to light in India. The examiner was appointed to probe Nirav Modi’s ties to three US entities.

Real estate transactions

The examiner has traced the use of fraudulent funds for certain real estate transactions. An apartment at the Essex House, located at 160 Central Park South, was Nirav Modi’s personal residence in New York. The Essex House Apartment was purchased through Central Park Real Estate (CPRE), which was formed in 2007 in Delaware, to acquire the apartment. CPRE was initially owned by Firestar Diamond Inc, and the ownership was later transferred to Firestar Group Inc.

CPRE had bought the apartment for about $5 million, taking a $3-million mortgage from HSBC, and the remaining $2 million was funded by the shadow entities, Brilliant Diamonds and Firestar Diamond Inc. In December 2017, the HSBC mortgage was paid off. In January 2018, about one month before the filing of the Chapter 11 cases and weeks before the unfolding of the PNB fraud in India, CPRE (owning the apartment) was sold to the Ithaca Trust (outside of the Firestar corporate structure). The beneficiaries of the trust were Modi and his wife and children.

Suspicious transfers

Bailey Banks & Biddle – a well-established operator of specialty retail jewellery stores located in regional shopping malls and outlet centres in the US – also appears to have been one of the beneficiaries of the fraudulent funds.

Bailey Banks & Biddle was owned by Finlay Fine Jewelry Company, as of 2009, when Finlay Enterprises filed for Chapter 11 bankruptcy. Synergies Corporation – a US holding company in the Firestar corporate and owner of A Jaffe Inc – emerged as one of the bidders for Bailey Banks & Biddle acquiring the company’s intellectual property rights.

The examiner identified a series of transactions in which $21 million was transferred from A Jaffe to a Delaware company, Twin Fields Investments, the parent company of Bailey Banks & Biddle (BBB). Hence, Twin Fields appears to have funded BBB’s operations through Modi’s three US companies, other Firestar entities, and shadow entities.

“Twin Fields was primarily funded by A Jaffe, Fine Classic (a shadow entity controlled by Purvi Modi, Nirav Modi’s sister), and Link High International, a British Virgin Islands entity,” said the report. A review of Twin Fields’ bank statements for the period November 1, 2010 to March 21, 2018, revealed that of the $80-million funds that flowed through Twin Fields, at least $42 million went to BBB Group.

The bank records reviewed by the examiner’s team reveal that from 2010 to early 2013, Link High was the primary source of funds for the Twin Fields’ account, depositing $23,602,600. From early 2013 to the end of 2015, A Jaffe took the lead as the primary source of funds that were deposited into the Twin Fields’ account.

By March 2017, A Jaffe had transferred $21,330,000. From early 2016 until the end of 2017, it was Fine Classic that primarily deposited funds into Twin Fields’ account. A total of $26,864,056 was deposited.

Interestingly, Twin Fields’ Bank of America account was closed on February 21, 2018, with a balance of just $13,281 – five days before the US companies filed for bankruptcy.

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Published on August 31, 2018