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NY Dealer Sentenced in Memo Theft Case

Feb 27, 2020 9:31 AM   By Leah Meirovich
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RAPAPORT... A New York diamond wholesaler was sentenced to five years of probation and ordered to pay $65,000 after stealing nearly $600,000 in loose diamonds sent to him on memo.

Isaac Dayan, whose business operates under the name Diamonds Direct, pleaded guilty to charges he failed to pay 11 New York-based diamond companies that had given him stones between November 2015 and November 2018, the New York Police Department (NYPD) told Rapaport News Tuesday. He was arrested in January 2019, and sentenced by a criminal court last week.

Due to New York’s new bail-reform system, which was instituted last month, Dayan will not serve jail time, and is only required to pay a 10% penalty restitution fee, according to Sonu Kothari, a partner at diamond wholesaler Belgium NY, one of the companies Dayan defrauded.

“It’s upsetting, because it’s just a slap on the wrist, but it’s better than it used to be,” Kothari told Rapaport News. “The laws are very lenient though. Depending on the crime, many people don’t even have to post bail for what [the authorities] label ‘victimless crimes.’”

However, the crimes are not victimless, according to Kothari, who noted that he had since become much more cautious and was afraid to take steps to expand the business because he had trouble trusting potential business partners. The fallout from the theft has also caused some of the smaller businesses affected to have to lay off employees due to the loss.

Meanwhile, the offense — which involved a type of Ponzi scheme whereby Dayan would build up confidence by selling a few stones from a dealer over a period of time until he had gained trust — was not Dayan’s first. In 2007, the United States Court of Appeals, Second Circuit, upheld a 2004 conviction for check fraud, as well as two counts of fraudulently obtaining a bank loan and conspiracy to commit bank fraud.

Despite the judgement, Dayan managed to maintain business relations with dealers thanks to a system in the trade that bypasses regular background investigations, Kothari explained.

“There are a lot of legalities involved with background checks,” he said. “Instead we do a trade reference, which means [Dayan] would provide a list of people he’s worked with in the trade, and we call them for references. We would not necessarily know of his previous arrest.”

Prior to the January 2019 arrest, the Diamond Dealers Club (DDC), of which Dayan was a member, arbitrated the case between the two parties, but failed to find a resolution.

“Isaac Dayan was suspended by the DDC on June 14, 2017, for failure to comply with the decision by the arbitration tribunals and failing to meet his obligations [under] the Diamond Dealers Club bylaws,” said DDC managing director David Lasher.

While Kothari feels Dayan’s sentence was too lenient, he is gratified action was taken.

“It’s the first time in my 21 years in the industry I’ve actually seen law enforcement help us,” he noted, pointing out that the police department was extremely helpful in getting Dayan charged. Kothari believes it’s a great step forward for the trade, and hopes it will discourage others from running similar schemes.

However, Leon Bitelman, a partner and executive vice president at Illuminex Diamonds, who also lost money to Dayan, sees things differently.

“We are very disappointed in the outcome of this case,” he told Rapaport News Wednesday. “All of us have spent a lot of time and money invested in seeing justice done. In the end, this court decision has only made it easier to steal.”

Dayan’s lawyer, Lee Ginsberg, of Freeman, Nooter & Ginsburg, noted that “under all of the circumstances of this case, considering ability to pay and personal health issues, the parties reached a fair result.”

Correction, March 1, 2020: Isaac Dayan’s attorney was previously Saul Bienenfeld. In the past year, he has been represented by Lee Ginsberg who negotiated the plea agreement on Dayan's behalf.

Image: The New York diamond district. (Shutterstock)
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Tags: Belgium NY, David Lasher, DDC, Diamond Dealers Club, Diamonds Direct, Grand Larceny, Illuminex Diamonds, Isaac Dayan, Leah Meirovich, Leon Bitelman, Rapaport News, Saul Bienenfeld, Sonu Kothari
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