The US Securities and Exchange Commission (SEC) has filed charges against former Lugano Diamonds CEO Mordechai Ferder for allegedly running a fraud scheme that caused it to record more than $1 billion of fictitious revenue.
According to the complaint, which the SEC filed last week in the US District Court for the Central District of California, Ferder orchestrated a fraud scheme from 2021 to 2025 that centered on him convincing individuals to invest hundreds of millions of dollars in diamonds that neither he, nor the company, ever owned, the commission said last week.
“As alleged, Ferder made material misrepresentations to investors, including false claims that he or Lugano would acquire the diamonds that were the subject of the investment contracts, that he would identify a buyer for the diamond underpinning an investment contract, and that he would create a piece of jewelry from the diamond or otherwise try to increase the value of the investment,” the filing stated. “In reality, Ferder and Lugano neither bought, nor took, any steps to increase the value of the investment contract diamonds, instead making Ponzi-like payments back to the investors.”
Additionally, Ferder directed Lugano to record investor funds as revenue, and to disguise repayments to the investors as inventory purchases, the filing stated. After Lugano’s parent company, Compass Diversified (CODI), discovered Ferder’s scam last year, it revalued the jewelry business. It lowered the figure from the $179 million Lugano’s assets were worth at the time of its acquisition in 2021 to $5 million, and erased over 85% of its revenue.
The SEC is seeking permanent injunctions against Ferder and Simba IL Holdings, an entity Ferder controlled. In addition, it is requesting both entities be legally forced to pay back money or profits gained through their illegal actions, with prejudgment interest, and is pursuing civil money penalties against them. The commission has also filed for an officer and director bar against Ferder. Meanwhile, the complaint names Ferder and his wife as relief defendants in their capacities as trustees of three family trusts, which allegedly received proceeds of the fraud.
Ferder’s actions first came to light in May of last year following an internal investigation into financial irregularities CODI uncovered. In November, Lugano filed for bankruptcy.
Image: A Lugano boutique in London. (Lugano Diamonds)
