The billionaire who allegedly swindled $1.8 billion from an Indian bank

Not all that glitters is gold.
Not all that glitters is gold.
Image: Diane Bondareff/AP Images
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Diamond trade wasn’t 47-year-old billionaire Nirav Modi’s primary career choice. He wanted to become a music conductor as a young man, and going by the recently made allegations (pdf) regarding his involvement in the Punjab National Bank (PNB) fraud, it looks like he made at least some bankers dance to his tunes.

On Feb. 14, India’s second largest state-owned lender, PNB informed the stock exchanges (pdf) that it had detected a $1.77 billion fraud.

As the day unfolded, reports emerged that the bank had filed two complaints against Modi with India’s top investigation agency, the Central Bureau of Investigation, for carrying out fraudulent transactions. An earlier first information report (FIR) filed against Modi on Jan. 31 also alleged that he, along with his maternal uncle Mehul Choksi, chairman of jewellery retailer Gitanjali group, had duped PNB of Rs280 crore ($35.94 million).

So, how did Modi end up as an elite jewelry designer with a net worth of $1.7 billion, and ranking 85th in Forbes’ 2017 list of India’s richest?

Diamonds in the blood

Modi’s family history is fairly well known—he comes from a line of diamond traders from Palanpur, Gujarat. His grandfather Keshavlal Modi made his way from Mumbai to Singapore, selling rough diamonds in the 1930s and 1940s. Two decades later, his father Deepak Modi set up  shop in Antwerp, Belgium, the world’s diamond capital, where Modi grew up. After dropping out of college, Nirav came to Mumbai as a 19-year-old for an apprenticeship under Choksi, who himself had taken over reins at Gitanjali Gems at a young age.

After nearly a decade into the trade, Modi ventured out independently, sourcing diamonds from around the world and selling them to jewellery makers. He set up Firestone Diamond in 1999, later re-christened Firestar Diamond. The company rapidly expanded through partnerships with and acquisitions of diamond retailers in the US, Belgium, and Armenia. In 2010, the firm partnered with Rio Tinto to sell rare Argyle pink diamonds in India. Firestar claims to have several hundreds of copyrights, trademarks, and patents to its name.

After designing a pair of earrings for a friend in 2009, Modi decided to venture into jewellery designing. His claim to fame was a Golconda diamond necklace made with a rare diamond mined in Hyderabad. It was sold in November 2010 for $3 million at an auction held by British auction house Christie’s.

A month later, Modi launched his first jewellery store in New Delhi, branding it after himself. Two years on, at an auction held in Hong Kong by another British auctioneer, Sotheby’s, Modi sold his handiwork for $5.1 million. Now, there are 17 Nirav Modi stores worldwide.

In 2013, for the first time, Modi entered the Forbes’s list of Indian billionaires. “(The) diamond jewelry designer is reportedly mulling an IPO of his $1.8 billion (revenue) Firestar Diamond… Modi’s ultrarich and celebrity clients include Hollywood actress Kate Winslet, who wore his jewels at the Oscar ceremony this year,” Forbes India said in a 2016 profile of him.

Until the fraud allegations sprang up, things were looking up for Modi, one of India’s 10 youngest billionaires.

Bank fraud allegations

The exact details of the alleged $1.77 billion-fraud at PNB are still unclear, but connections have already been made between the wrongful transactions and Gitanjali Gems and Nirav Modi, according to the Press Trust of India. Other jewellery companies, including Ginny and Nakshatra, are also likely to be subjected to scrutiny.

But both Modi’s and Choksi’s companies have been quick to dissociate themselves from the scandal. On Feb. 07, following the filing of the first FIR by PNB, Gitanjali Gems had said Choksi was “falsely implicated,” and has no association with the firms named in the report. Firestar also washed its hands off the entire matter. “This matter has no affiliation, legal or otherwise, with Firestar International, which is the flagship enterprise of Nirav Modi,” the company said in an e-mail response.

Whoever said diamonds are forever.