The former CEO of high-end jewelry manufacturer and retailer Lugano Diamonds & Jewelry Inc. is facing allegations of perpetrating a massive accounting fraud that reported over US$1 billion in fictitious revenue.
In a California district court, the U.S. Securities and Exchange Commission (SEC) filed a complaint charging Mordechai Ferder, the founder and former CEO of Lugano Diamonds, for allegedly running a scheme that resulted in Lugano, and its public parent company, Compass Diversified Holdings (CODI), falsely recognizing money that was raised from investors as revenue.
According to the regulator’s complaint, between 2021 and 2025, Ferder misled investors by making a series of material misrepresentations — including false claims about its plans to acquire diamonds and boosting their value by using them to produce jewelry, or other means.
The alleged accounting fraud was based around “sham investment contracts involving diamonds that resulted in Lugano … recording over a billion dollars of fictitious revenue,” the complaint alleged.
The scheme involved deceiving investors into “investing hundreds of millions of dollars in diamonds that neither defendants nor Lugano ever owned, based on promises that Ferder would use his jewelry industry expertise to increase the diamonds’ value,” the complaint said.
In fact, the SEC alleged that they didn’t acquire any diamonds, and instead used investors’ money to make Ponzi-like payments to other investors to keep the scheme going. It also alleged that Ferder directed Lugano to fraudulently record investor funds as revenue and use fake invoices to record entirely made-up revenues, resulting in the companies recognizing over US$1 billion in fictitious revenues.
After the scheme was discovered, Lugano was forced to declare bankruptcy, and its parent company had to restate its financials, writing down the value of Lugano’s assets to just US$5 million from US$179 million, and writing down revenues by over 85%, the regulator said.
The allegations have not been proven.
The SEC is seeking permanent injunctions, disgorgement, civil penalties and an officer and director ban against Ferder. It’s also seeking sanctions against his family trust, Simba IL Holdings LLC, and named Ferder and his wife as relief defendants.