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PNB fraud probe drove Nirav Modi's jeweler to US bankruptcy filing

Punjab National Bank shares plunge most since 2004 in Mumbai

Allison McNeely | Denise Wee | Bloomberg 

Nirav Modi had attributed his inability to pay the dues to PNB's haste in going public about the matter. File photo

The international jewelry business that’s part of the empire controlled by Nirav Modi, the billionaire accused of masterminding India’s biggest bank fraud, was driven toward U.S. protection after Indian authorities began seizing and freezing assets.

The company’s attorney outlined that background at a Manhattan federal court hearing on Tuesday. Modi, the chief executive officer of the parent company of the jeweler Firestar Diamond Inc., is under investigation for an alleged $2 billion fraud in India. Firestar isn’t linked to the complaints filed by authorities, the company said last month. Still, the seizure of assets took its toll.

“That had a dramatic and sudden impact on the operations of the U.S. companies,” said Ian Winters of Klestadt Winters Jureller Southard & Stevens LLP in the hearing on behalf of Firestar Diamond.

Two holding companies and Modi personally are guaranteeing an existing revolving credit facility with Discount Bank, according to a filing. Discount didn’t immediately respond to a request for comment.

Modi, a jeweler who’s dressed actresses including and Priyanka Chopra, has been accused along with of defrauding PNB alleges that the duo and their associates worked with some rogue employees and used fake guarantees to obtain loans from abroad.

were disrupted for the wholesale jeweler and its affiliates after Indian authorities shut certain factories that provided most of the company’s products, and this affected customers and employee confidence, Winters told the court.

The company has since worked to secure alternative supplies and keep the businesses as going concerns.

The case is Firestar Diamond Inc., 18-10509 U.S. Court, Southern District of (Manhattan).

First Published: Wed, March 07 2018. 13:00 IST