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SPECTRE OF SYNTHETIC STONES
An incident of fraud with all the ingredients of a Hollywood blockbuster, sliced through the international diamond industry like a hot knife through butter. A diamond dealer tried to get synthetic diamonds certified as naturally mined stones. Although the laboratory effectively applied the speed breaker, the community has broken out in a sweat over questions of the volume of cheaper, undisclosed synthetic diamonds already in the market, being passed off as naturally mined stones to consumers, thus jeopardising the trust and integrity in a carefully structured industry that operates more on character than currencies. Even as the community tries to get to the bottom of this, Diamond World mulls on the readiness of the community to deal with the spectre of synthetic diamonds.
By: Diamond World News Service
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Jun 18 2012 4:14PM
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Reference: 7033  

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The story had all the makings of a theatrical potboiler, an international conspiracy concerning diamonds, a fraud intended to be committed across intercontinental destinations, the potential for huge unscrupulous gains, multi corporate dealings, questions about the damage already caused and perhaps even business rivalry, all of which came to light by the vigilance of a simple individual in a laboratory, doing his job well.

May 2012. A summer afternoon in New York. A parcel of 145 seemingly high quality, large, type IIa diamonds purchased on the usual 60 day credit by the polished diamond dealer, as ‘natural stones’, was sent to the International Gemmological Institute (IGI) for certification as ‘natural diamonds’. A careful analysis revealed that these were not natural but synthetic or lab grown diamonds. The dealer was informed whereby he produced the batch of more than 600 stones, all CVD synthetics that he had bought through a diamond broker, as natural rough stones, under the full price. If this batch of diamonds had not been providentially discovered, the parcel would have flown out to consumers, marring the reputation of the seller and the integrity of the industry.

Alarmingly, the IGI found that around the same time, smaller parcels of synthetic stones had also been submitted to IGI’s Mumbai and Antwerp laboratories in addition to National Gems & Jewellery Technology Administrative Centre (NGTC) laboratory in China, for certification as natural diamonds. All these sets of goods were CVD synthetic diamonds, likely to have come from the same source as their characteristics were similar.

This was serious fraud discovered and nipped in the bud. IGI informed others in the industry, the Belgian Federation of Diamond Bourses (BFDB); DTC Research; and the Antwerp World Diamond Centre (AWDC). Additionally, IGI also shared detailed scientific information with other gemological laboratories around the world to keep them in the loop. Even as the parties deliberated the next course of action, DTC Research issued an alert to its sight holders informing them of this breach of trust in the industry.

This was followed by the IGI issuing an intra-laboratory alert warning members of the gemmological community to be vigilant, and treat with particular caution any parcel of stones containing an unusually high proportions of type IIa’s.

The DTC Research alert informed its members of the attempted fraud declaring that in each case, the CVD synthetic diamonds had similar characteristics and a common source, besides being heat treated post synthesis. The DTC also stated that “the combination of characteristics in the undisclosed stones was ‎strikingly ‎similar to that reported by the Gemological Institute of America (GIA) for 16 CVD synthetics ‎received earlier from ‎Gemesis Diamond Company.” DTC thus effectively implied that Gemesis Diamond Company, a key manufacturer of synthetic stones, was the owner of the undisclosed synthetic stones, and had deliberately and fraudulently heat treated the stones to make them look like natural diamonds.

Gemesis Diamond Company, CEO Stephen Lux then released a statement that “Yes, Gemesis had been on the brink of bankruptcy earlier but it was not involved in selling rough diamonds as mined. Also, there were several companies practicing the CVD technology. As DTC and IGI knew, CVD stones whether made by Gemesis or others would be indistinguishable from each other. Moreover, Gemesis had been the most open in terms of working with grading labs and going through certification of its synthetic stone through laser engraving.”

As reported by diamond analyst, Chaim-Even-Zohar, in Diamond Intelligence Briefs, in 2010 Gemesis, on the verge of bankruptcy, was bailed out by Indian diamantaire, Jatin Mehta of Su-Raj Diamonds, who acquired a controlling interest in the company through his son, Vishal. The name was changed to Gemesis Diamond Company and the production facilities were moved from Sarasota, USA to Malaysia, which today produces lab grown diamonds through the HPHT method while Gemesis in Singapore uses the CVD method for manufacturing synthetic stones.

The World Federation of Diamond Bourses (WFDB) President, Mr Avi Paz also urged members to identify synthetics and disclose any treatments used on diamonds failing which the rules relating to trading in misrepresented or undisclosed products, whether inadvertently or not, would be invoked. “Any violation of these rules could be grounds for suspension, expulsion, fine or other appropriate disciplinary measure,” he warned in the interest of maintaining transparency in global business so that consumers could receive full disclosure about the diamonds they purchased.

It was clear that someone was interested in passing off synthetics as natural stones along with an authentic laboratory certificate, thereby intending to cheat consumers and commit a huge fraud involving tens of millions of dollars. But there could be something more.

A source close to the diamond industry pointed out ‘in spite of a fraud being committed, no police complaint was made anywhere. Not in New York, Antwerp, Mumbai or even in China. Even the stones, presumably imported into these countries on fake documents as natural stones, had not been confiscated by any legal authority.”

When questioned, Mr Roland Lorie, CEO IGI, agreed, informing DW that “if only a few stones would have been brought for certification, one could assume that it was an accident. But over 600 stones is not an accident. In this particular case someone tried to cheat by selling a product stating it as another. This is illegal in business. A police complaint will maybe follow, but the question is who will make the complaint. Many meetings are taking place with all the major players of the industry.”

Without getting into the questions of who did what to whom and why, it is clear that just as the diamond industry was going from outright denial and opposition to a slow acceptance of synthetic stones, this incident has threatened to jeopardise trust and integrity, the corner stone of the global diamond industry. Reputed diamond dealers coming together on this issue agree that synthetics don’t pose a threat to the community as long as they are properly disclosed.

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