A New York bankruptcy court has dismissed a plea filed by fugitive diamond merchant Nirav Modi and his colleagues seeking to have fraud allegations against them dropped.
Richard Levin, the court-appointed trustee of three US corporations—Firestar Diamond, Fantasy Inc, and A Jaffe—indirectly held by Nirav Modi in the past, stated the claims.
Levin had also asked for a minimum of USD 15 million in compensation for “damage” caused to Modi’s debtors by his colleagues Mihir Bhansali and Ajay Gandhi.
Judge Sean H Lane of the Southern District of New York Bankruptcy Court issued the ruling last Friday, dealing a huge blow to the Indian fugitive and his associates.
“In a clear judgement, US Trustee Richard Levin’s revised complaint in the adversary action coming out of Modi’s initial chapter 11 bankruptcy petition, alleging fraud, violation of fiduciary responsibilities, RICO, and associated state law claims,” Indian American attorney Ravi Batra told PTI.
Mr Batra explained the 60-page judgement by saying Modi re-invested his earnings in his company as extra sales to artificially inflate the stock price/company valuation by forming a conspiracy to defraud Punjab National Bank and others of over USD1 billion.
“However, in order to get the ill-gotten cash out of his companies through bank fraud, he engaged in a second fraud to disguise those withdrawals for personal gain as legitimate business operations,” Mr Batra said.
According to the court ruling, Levin’s petition sought reparations for loss caused to the debtors and their estates by Modi and his two accomplices as a result of their six-year international fraud, money laundering, and embezzlement operation.
It claims Modi and his colleagues devised and carried out a scheme to “get loans, credits, or other monies under false pretences and without collateral” from a number of banks, including the PNB, between early 2011 and early 2018.
The bank scam involved the use of letters of undertaking (LoUs), an Indian-only financial instrument designed to speed up import transactions. It was alleged that Modi and his co-conspirators used bogus transactions to artificially increase the import quantities of Modi’s India-based enterprises in order to get more LoU money.
Modi and his co-conspirators allegedly used a web of shell companies known as “shadow corporations” established in Hong Kong and Dubai to generate phoney import transactions and launder the proceeds, according to the report.
According to the judge’s order, the PNB and the other victimised institutions have lost more than USD1 billion as a result of the fraud.
Levin detailed how Modi, Bhansali, and Gandhi benefited directly from fraudulently issued LoUs and were involved in circular transactions until early 2013, when the debtors no longer directly participated in the import and export transactions underlying LoU issuances and instead received proceeds indirectly through “shadow entities.”
(With inputs from NDTV.)
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