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Firestar Diamond Inc, the US company of Nirav Modi, has filed for bankruptcy in United States Bankruptcy Court in the Southern District of New York.
In the petition, the company has listed its assets and liabilities in the range of $50 million and $100 million. The petition also mentions that the company has about 50-99 creditors. The company has also disclosed in the petition that it will have funds for distribution to its unsecured creditors.
The petition which has been signed by Mihir Bhansali – mentioned as the sole director of Firestar Diamond – is seeking relief under Chapter 11 of the United States Bankruptcy Code. Although Bhansali is listed as the Chief Executive Officer, the company agent at the time of incorporation is listed as Mr. Nirav Modi.
Firestar Diamond filed this petition along with its affiliate companies – A.Jaffe,Inc and Fantasy, Inc.
The latest filing with State of Delaware indicate that the company was in ‘Good Standing’.
Chapter 11 of the Bankruptcy Code allows the company to reorganize its business and emerge out of bankruptcy as an operating company. This process could take anywhere between 12 to 18 months in the United States. Unlike Chapter 7 of the Bankruptcy Code, where the company will be dissolved completely, Chapter 11 bankruptcy will give an option to revive Firestar Diamond after these proceedings.
Firestar Diamond, along with Firestone Inc and Next Diamond Inc, were in the diamond business. Firestar Diamond was incorporated in March 2004 and has been active for the past 14 years. Before the launch of the brand ‘Nirav Modi’, Firestar Diamond was the trading brand of its Chairman Nirav Modi.
Klestadt Winters Jureller Southard & Stevens LLP has filed the Voluntary Petition for bankruptcy under the provisions of Chapter 11 of Title 11 of the Bankruptcy Code. The firm has represented Nirav Modi’s companies since 1975. A Jaffe Inc, which is one of the affiliate companies listed in the bankruptcy petition, was incorporated by Klestadt Winters with its law firm as address for correspondence.
Ian Winters, a Partner at the firm, is handling the bankruptcy case for Nirav Modi. Winters has extensive experience in the diamond, jewellery and apparel industries, and has a substantial background in factoring and asset-based lending.
The case has been assigned to Judge Sean H Lane of the United States Bankruptcy Court for the Southern District of New York.
One of the legal experts that we spoke to says that this is a preliminary filing and a more substantial filing will follow in this case.
Meanwhile in India, both the Central Bureau of Investigation (CBI) and Enforcement Directorate (ED), are aggressively investigating the scam.
The ED has moved a special court seeking a non-bailable warrant against Nirav Modi under the Prevention of Money Laundering Act (PMLA), after he failed to appear and depose before the agency. The ED has seized his cars, expensive watch collection and properties in India.
Read the Court filings by Firestar Diamonds Inc