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What We Know About Nirav Modi’s US Companies

Court declaration lifts lid on Firestar, Fantasy and A. Jaffe

Mar 7, 2018 11:08 AM   By Joshua Freedman
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The $2 billion fraud allegations against Indian jewelry tycoon Nirav Modi and Gitanjali Gems chief Mehul Choksi have shocked the industry, as well as raising questions about the wider impact on the trade.

One of the first casualties of the fallout was US jeweler Firestar Diamond, which, by virtue of being part of Modi’s business empire, found itself thrust into a crisis. Firestar and two of its affiliates, Fantasy and A. Jaffe, filed a petition for Chapter 11 bankruptcy in the US on February 26.

Until recently, the details of Firestar’s operations and connections to Modi were a subject of much talk, but little confirmed fact. However, Mihir Bhansali, the president of the three companies, filed a court declaration on February 28 under penalty of perjury, lifting the lid on the businesses and their ownership.

Here, Rapaport News presents the key information about Firestar, Fantasy and A. Jaffe, and their interaction with the wider jewelry and financial community, as contained in that filing.

What are Firestar Diamond, Fantasy and A. Jaffe?

All three companies are wholesalers of fine jewelry, operating out of New York, though their precise focuses differ.

Firestar and Fantasy supply jewelry to major chains, including to Signet Jewelers brands Zales, Kay Jewelers and Jared, as well as to department stores Macy’s and J.C. Penney. Other clients include wholesale club Sam’s Club — which Walmart owns — and Costco. All those organizations either declined to comment on the nature of their supply from Firestar and Fantasy, or did not respond to Rapaport News’ request for information.

Both jewelers also supply to the US Navy Exchange Service Command (NEXCOM), a provider of goods and services to military members. Firestar produces NEXCOM’s Navy Star Diamond, a product that is exclusive to the exchange, a NEXCOM spokesperson said.

Firestar also has several copyrights, trademarks and product-design patents, while both Firestar and Fantasy hold certain intellectual-property rights related to the Endless Diamond brand. Endless-cut diamonds — a Modi creation — are curved, such that they can entirely surround a ring without gaps. (Modi gifted his first Endless ring to his wife, according to an interview he gave with the Financial Times in November 2016.)

Firestar and Fantasy have annual sales of about $90 million between them, according to the court declaration. The two companies currently have about $33.25 million-worth of jewelry on consignment with customers.

A. Jaffe, meanwhile, is centered around its 125-year-old luxury bridal brand, “A.JAFFE.” The company sells fine jewelry to hundreds of independent jewelry stores in the US. Its sales have grown by double-digit percentages for the past three years, it said. The company projected them to rise to $23 million in fiscal 2018. Some $7.3 million-worth of its jewelry is on consignment with clients.

What’s special about A. Jaffe’s products? 

Its rings are recognizable by two features for which it claims to hold certain intellectual-property rights. The first is the “quilt” style, a criss-cross design on the inside of the ring. The second is its rendering of the “European” shank — a style of ring shape with a slightly flattened base. A. Jaffe’s version of the latter features a lower-case “a” on the bottom left of the ring, next to a small diamond. 

Have they always had those names?


Fantasy, formed in 2012, has had that name ever since. However, when Firestar came into existence in 2004, it was under the name Jewelry Solutions International. It became Next Diamond in 2005. In 2007, its name changed to Firestone, before a final switch in 2011 to Firestar Diamond.

A. Jaffe is an older operation: It was founded in 1975 as Sandberg & Sikorski Diamond Corporation, before dropping the word “Diamond” in 1995. It became A. Jaffe in 2011.

Does Nirav Modi own them?

Ultimately, yes, but in a complicated way. This is how Bhansali’s declaration explains the ownership structure:

Modi is “directly or indirectly” the majority shareholder of Indian company Firestar International. That company owns Hong Kong-based Firestar Holdings, which owns Synergies Corporation, which owns Firestar Group, which owns Firestar Diamond, which owns Fantasy. Synergies, Firestar Group and Firestar Diamond are US corporations.

Synergies also owns 95% of A. Jaffe, with the remainder held by its founder, Sam Sandberg.

Who runs them?

Bhansali is the president and sole director of Firestar Diamond, Fantasy and A. Jaffe, and serves in the same role for Firestar Group and Synergies. Ajay Gandhi is secretary and chief financial officer for those five companies.

What do the allegations against Modi mean for the companies?

Indian authorities investigating the claims began seizing and freezing assets belonging to Modi and his companies, resulting in the closure of many businesses. The properties they seized included factories in India that produced most of the jewelry Firestar, Fantasy and A. Jaffe sell to customers. Those Indian companies also provided them with certain back-office and support functions.

“The sudden loss of its supply chain and back-office support has dramatically impacted the operations of the debtors,” Bhansali said in his declaration, referring to the three companies that filed for Chapter 11.

The companies and their employees have worked “tirelessly” to seek alternative supply sources and back-office and support functions, Bhansali noted. Staff members also worked to reassure suppliers and clients that they had no involvement in the alleged wrongful conduct, and that they were committed to carrying on their business and minimizing the damage.

The negative publicity also affected operations, creating uncertainty and confusion about Firestar and its affiliates’ ability to continue as a viable business, the executive explained. Some suppliers expressed reluctance to continue trading with the companies, while certain clients began to explore other potential contractors, he said.

Why did they file for Chapter 11?

The petition for bankruptcy protection was an attempt to preserve the companies’ value and achieve a sale or other transaction that would provide the necessary resources, Bhansali said. The companies intend to continue operating, while seeking an injection of capital or a sale, either in part or in full. Early expressions of interest in buying the businesses have been strong, he noted.

“The debtors expect that the Chapter 11 process will add a sense of order, alleviate some of the concerns expressed by vendors and customers, and create a forum in which potential purchasers for all or some of the businesses are willing to participate,” the president continued.

The companies also held discussions with the court and its lenders, Israel Discount Bank of New York (IDB) and HSBC Bank USA, about making certain funds available to ensure the jewelers would have enough liquidity to sustain operations.

To whom do they owe money?

Firestar and Fantasy’s bank borrowings comprise a $12 million revolving-credit facility with IDB, and a $16 million loan agreement with HSBC, the document shows. As of February 26, the companies owed about $8.6 million to IDB, and roughly $11.4 million to HSBC.

Both banks have legal rights to all of the borrowers’ assets (called a “senior lien”), meaning they can recover their money by selling off those assets. As secured lenders, they have priority over other creditors. Modi has personally guaranteed the IDB credit facility, as have Firestar International and Firestar Group, the filing continues.

HSBC declined to comment, while IDB did not respond to an email from Rapaport News.

No creditors of A. Jaffe are “secured creditors,” meaning none of them holds any collateral.

The companies also owe smaller amounts to certain unsecured creditors, though only three of them — creditors to A. Jaffe — are owed more than $1 million each, according to the filing. Those three all appear alongside United Arab Emirates addresses.

Main image: Sorbis/Shutterstock. Inset: An A. Jaffe quilted engagement ring featuring a halo diamond.
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