The Diamond Industry’s Summer of Discontent and Dishonesty

Aside from the general malaise of the diamond industry, here are the big diamond stories this summer:

–  Last month, the Surat Diamond Association terminated the membership of diamond dealer Chandu Sheta, a former board member, for allegedly mixing synthetic diamonds with naturals without disclosure, according to The Times of India. Sheta says he didn’t know the diamonds were lab-grown and is a “scapegoat.”

– Also last month, the GIA suspended a principal of Cristy Gems and four related companies for allegedly inscribing stones with report numbers that didn’t match them.

– Around the same time, Bharat Diamond Bourse suspended Mumbai-based VSM Diamonds and four of its directors for allegedly selling synthetics without disclosure.

– It didn’t attract a lot of attention, but on his last conference call, Charles & Colvard CEO Marvin Beasley said there was evidence that moissanite was being mixed in with diamonds in India.

– And of course, the trade is still wondering about how to handle the mystery treatment that temporarily improves a diamond’s color.

– There has also been news recently regarding two old stories: Diamantaire Erez D. is accused of defrauding the Antwerp Diamond Bank of $63 million, according to the Belgian press; and a U.S.-Belgian dealer is being extradited to face charges of trafficking in conflict diamonds during the Sierra Leone civil war. (Five former mine slaves filed the complaint against him, according to press accounts.)

The diamond industry is going through a tough time, and that could be causing some people to do desperate things. These reports keep popping up even as industry groups have become more aggressive in publicly naming the companies involved, which they have traditionally been reluctant to do.

In the end, these reports hurt everyone. The same way we all now have to take off our shoes at the airport because of a few terrorists, diamond companies now have to regularly check their products to avoid synthetics.

It’s important to stress that any dishonesty is limited, and that most people in the industry remain honest. But when people are on edge, these alleged episodes loom larger. The trade runs on trust, and these incidents strike at its heart. While these reports did not cause the current crisis, they contribute to the industry’s general anxiety, and the feeling that the normal order of business is breaking down.

JCK News Director