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PNB Fraud: Nirav Modi Firm Files For Bankruptcy. Ten Things To Know

Nirav Modi's Firestar Diamond Inc listed $50 million to $100 million in assets and liabilities and noted it had 50 to 99 creditors

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PNB Fraud: Nirav Modi Firm Files For Bankruptcy. Ten Things To Know

A company owned by Nirav Modi has filed for bankruptcy in a New York court

A company owned by Nirav Modi, the diamantaire at the heart of a Rs 12,600 crore fraud case, has filed for bankruptcy in a New York court, as CBI and Enforcement Directorate (ED) step up their investigations into the PNB fraud case that rocked the country's financial system, among others. The US bankruptcy filing by Firestar Diamond Inc comes as investigations by the investigating agencies into the fraud case are becoming more aggressive, including a raid last week of Modi's former law firm that lawyers described as unprecedented.

Nirav Modi Firm Files For Bankruptcy. Ten Things To Know

1. Firestar Diamond Inc listed $50 million to $100 million in assets and liabilities and noted it had 50 to 99 creditors, according to a court filing in the Southern District Of New York on late Monday.

2. The company is a unit of Firestar International, controlled by Modi, a jeweller who built his range of international diamond businesses in part by drawing a famous roster of clients such as actress Kate Winslet. His flagship Firestar International had $2.3 billion in sales as of March 2017, according to figures previously provided by the company.

3. Nirav Modi, along with his uncle Mehul Choksi, owner of Gitanjali Gems Ltd, are suspected to have colluded with bank officials at Punjab National Bank (PNB) to obtain unauthorised loans over a six-year period.

4. PNB late on Monday said the amount of those fraudulent transactions could rise by $204 million to nearly $2 billion, sending its shares reeling to a 20-month low.

5. The scale of the fraud has raised concerns about the potential for similar cases across India's banking sector. The Finance Ministry on Tuesday set a 15-day deadline for state banks to take action to improve their oversight of operational and technological risks.

6. The ministry's Department of Financial Services also ordered state-run lenders to comb through their bad loans of more than 500 million rupees ($7.71 million) for potential fraud.

7. Among the actions lenders must take include identifying current oversight weaknesses and having banks' boards "assign clear accountability" for implementation and compliance.

8. Analysts said the government directive could hit banks in the short-term if more fraud was detected, though it would benefit the sector in the long-term.

"The oversight in the banking system is obviously not good," said Yuvraj Choudhary, an analyst at brokerage Anand Rathi. "This could lead to uncovering of more potential scams. We can expect bottom-lines to be hit in the coming quarters."

9. Meanwhile, the CBI source added current and former officials at PNB continued to be questioned, including former managing director Usha Ananthasubramanian, who now heads state-run Allahabad Bank, as well as officials from other lenders that lent to companies tied to Mehul Choksi and auditors.

10. At least a dozen people - six from the bank and six more from Modi's and Choksi's companies - have been arrested, while investigators have seized a number of properties from the two, including jewellery and luxury vehicles.

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