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PNB Fraud: Accused Nirav Modi’s Company Files For Bankruptcy In US

Firestar Diamond Inc has listed the total worth of its assets in the range of of $50 million to $100 million.

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PNB Fraud: Accused Nirav Modi?s Company Files For Bankruptcy In US

Modi, founder of Firestar is suspected of colluding with PNB employees in the fraud.


Highlights

  1. The scam could amount Rs 12,700 crore, PNB said
  2. Initially PNB had estimated the fraud to be around Rs 11,400 crore
  3. The scam involved Nirav Modi and his three firms

Firestar Diamond Inc, the flagship company of billionaire Nirav Modi currently at the centre of the Punjab National Bank (PNB) scam, has filed for bankruptcy in the United States. The company has listed the total worth of its assets in the range of of $50 million to $100 million, according to a Reuters report citing a court filing in the Southern District Of New York on Monday.

Nirav Modi, and the firms he controls had allegedly leveraged the loopholes in the banking system by seeking letters of undertaking (LoU) and raising credit from foreign banks to pay its merchants. The scam which became public earlier this month, could amount Rs. 12,700 crore, PNB said. Initially PNB had estimated the fraud to be around Rs. 11,400 crore - already one of the biggest frauds in the country's banking system.

Modi, founder of Firestar Diamond, and his uncle Mehul Choksi, who owns Gitanjali Gems Ltd, are suspected of colluding with PNB employees in the fraud.

The scam which has been allegedly going on for the past seven years, involved Nirav Modi and his three firms-Diamond R Us, Solar Exports and Stellar Diamonds. The companies were allegedly procuring the LoUs from the PNB's Brady Road branch. These bank guarantees allegedly helped Modi raise the short-term loans from foreign branches of Indian banks to pay to its suppliers of raw material (rough stones).

Meanwhile since February 14, when the fraud was first disclosed by the bank, PNB shares have lost nearly 40 per cent of their value.

PNB earlier said that it was putting in place "better checks and balances", as investigators widened the probe into the country's biggest-ever bank scam. Meanwhile, the Reserve Bank of India, in a statement late on Friday, said it "has already undertaken a supervisory assessment of control systems in PNB and will take appropriate supervisory action".

 



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