Lugano Diamonds Files for Bankruptcy, Looking for Buyer

The Chapter 11 filing follows the resignation of CEO Moti Ferder, who stepped down after an investigation into the company’s finances.

Lenore Fedow lenore.fedow@nationaljeweler.com

Lugano Diamonds Greenwich Connecticut store

Lugano Diamonds’ store in Greenwich, Connecticut, which opened in 2023. The jewelry retailer filed for Chapter 11 bankruptcy protection this week.

Newport Beach, Calif.—Lugano Diamonds & Jewelry Inc. filed for Chapter 11 bankruptcy protection Sunday and is seeking a buyer.

The bankruptcy filing follows the departure of the high-end jewelry manufacturer and retailer’s CEO and co-founder Mordechai “Moti” Ferder in May.

Ferder resigned after a preliminary investigation by parent company Compass Diversified revealed “irregularities” in its financing, accounting, and inventory practices, announced in an 8-K filing.

Compass, a private equity firm, acquired a majority interest in the retailer in 2021 for $256 million, with Ferder retaining 40 percent of Lugano Diamonds.

In documents filed Sunday in bankruptcy court, Lugano’s Chief Restructuring Officer J. Michael Issa said the company appeared to be “a highly profitable and rapidly growing business” up until early spring 2025 when Compass started looking into its books.

Its revenue and operating income appear to have been overstated, he said, and the amounts are being revised to reflect “substantially lower” numbers.

Issa stated that within weeks of Compass’ 8-K filing, Lugano Diamonds heard from nearly 60 individuals who said they were involved in “investment contracts” with Ferder that were “outside Lugano Diamonds’ ordinary course of business.”

In most cases, these contracts were joint investment agreements in which a third party would co-invest in a loose diamond, ostensibly for resale at a “significant profit.”

Since the summer, around a dozen parties have filed lawsuits against Lugano Diamonds, Ferder, and other related parties, Issa said in the filing.

On June 24, Lugano Diamonds sued Ferder alleging fraud, concealment, constructive fraud, and breach of fiduciary duty.

Ferder is accused of concealing and misrepresenting the nature of the above-mentioned financial transactions. Lugano said these contracts created liabilities for the company, with Ferder allegedly disguising them as direct sales.

“He forged invoices and sale documents, sent out empty box shipments, falsely recorded the money from the third-party individuals as revenue for Lugano [Diamonds], and concealed the payment obligations from Lugano [Diamonds’] books,” stated Issa.

In a statement emailed to National Jeweler, Ferder’s attorney, Jeffrey Reeves of Reeves & Weiss LLP, said that Ferder denies the allegations made against him and is “profoundly disappointed” that the company he founded has filed for bankruptcy.

Reeves said the evidence will show that the proceeds from the investment contracts went directly to Lugano and that no funds were directed to Ferder or any entity under his control.

He added that Lugano’s management and Compass Diversified were “fully aware of these activities and knowingly accepted the financial benefits from them.”

The lawsuit is “a clear effort to misdirect accountability for the company’s action, performance, and ultimate failure, which occurred after Mr. Ferder’s departure from leadership,” said Reeves.

“Mr. Ferder is confident that the judicial process will bring the full truth to light and that he will be vindicated.”