India’s jeweller to the stars flees
NIRAV Modi brightened Kate Winslet’s earlobes and made Taraji P Henson’s collarbone glitter. A jeweller to the stars, Modi attained wealth and fame at home in India in a few short years. He socialised with British royalty and rubbed elbows with Donald Trump Jr. In January, he met with Narendra Modi, India’s prime minister and no relation, at the annual gathering of the world’s elite in Davos, Switzerland.
Today, he is on the run. About a week after Modi grinned for the cameras with the prime minister, a state-run Indian bank told regulators that it had found nearly $1.8 billion in fraudulent transactions linked to the jeweller’s account. Indian officials now accuse Modi, his family and business associates of assembling a global empire with nearly $3 billion in money obtained illegally, mostly from government-run banks. He denies wrongdoing.
The chase has captivated India at a time when the public increasingly believes the country’s debt-laden government banks are enriching its flashiest, most corrupt business tycoons.
The allegations against Modi have only strengthened people’s wariness of the state banks. Indian officials have publicly accused him of working with tellers at a single branch of one of them, Punjab National Bank, to obtain $1.8 billion from branches of other banks. So far, five Indian banks have been swindled in the scandal, four of them government-owned.
Just a decade ago, during the global financial crisis, Indian lenders were held up as a bastion of stability. Today, they are considered more vulnerable than those in other leading emerging markets, mostly because state-controlled lenders dominate the sector.
Of the $6.5 billion in fraudulent loans that have hit the industry over the past two years, the most egregious cases were at government-owned banks. Executives at those lenders are more likely to be appointed for their political connections than for their talent, financial analysts say.
“For every Nirav Modi in this country, there are 10 more, and they’re emboldened when they see the government failing to take action or pursue the right protocols,” said Vineet Dhanda, a lawyer who is urging the Indian government to tighten up the banking sector.
Modi’s lawyer, Vijay Aggarwal, denies his client defrauded banks and says there is only a misunderstanding over a much smaller loan worth about $40 million. He accused the banks and government authorities of damaging his client’s reputation and the Nirav Modi brand’s value, making it harder for the company to settle its debts.
“This was a case of civil transaction which the authorities have converted into a criminal one unnecessarily,” Aggarwal said in an interview.
Diamond traders and jewellers have long marvelled at Modi’s rise. Nicknamed NiMo in the press, from the first syllables of his name, Modi was known for wearing custommade cuff links with the fish from Finding Nemo.
Born in Antwerp, Belgium, to a relatively small diamond trading family, Modi attended the prestigious Wharton School of Business before dropping out at 19 to join the family business in Mumbai.
He first rose to international prominence in 2010, when he designed a necklace featuring a 12.29-carat diamond set with smaller pink diamonds. It was auctioned by Christie’s in Hong Kong for $3.56 million, nearly $1 million more than its asking price.
The bidding war landed Modi on the cover of the Christie’s catalogue, the first Indian to be featured so prominently by the auction house. He formed his Nirav Modi brand later that year and announced plans to open 100 stores around the world by 2025.
In 2015, Modi opened his flagship store on Madison Avenue, a few blocks from the luxury giants Cartier, Saks and Dior. Donald Trump Jr was there, taking a break from his father’s presidential campaign, as were actors and models: Naomi Watts and Coco Rocha posed for photos on the red carpet in front of the Nirav Modi logo. The next year, Modi designed 100 carats’ worth of diamonds that Winslet wore to the Oscars.
Now diamond traders are wondering whether the industry trusted him too quickly, and what the fallout on the international diamond trade will be. A diamond dealer in Antwerp said he and his colleagues became anxious last month when the Indian government banned its banks from issuing letters of credit to finance trade abroad, making it harder for Indian diamond traders – some of the biggest players in the industry – to buy stones.
“Your reputation is based on today,” said Sabyasachi Roy, the executive director of India’s Gem and Jewellery Export Promotion Council, sponsored by the Ministry of Commerce.
“Today you’re great until you’re not. Today you have actresses wearing your designs; tomorrow no one will look at you. But everyone was surprised by his quick rise.”