Israeli Diamond Dealer Held After Complaint Alleges 'Tens of Millions' in Embezzlement

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A trader inspects a diamond at the trading floor of Israel's Diamond Exchange (IDE) in Ramat Gan near Tel Aviv, Israel March 19, 2013.
A trader inspects a diamond at the trading floor of Israel's Diamond Exchange (IDE) in Ramat Gan near Tel Aviv, Israel March 19, 2013. Credit: Reuters, Nir Elias

The Israel Police said on Wednesday they had arrested a diamond dealer on suspicion of embezzlement after a complaint was filed by members of the Israel Diamond Exchange. A police spokeswoman identified the suspect as Hanan Abramovici, head of Hanan Abramovici Diamonds, saying: “The suspect is under arrest and we are currently questioning him on suspicion of embezzlement.” She gave no further details.

In issuing an order extending Abramovici’s detention by two days, however, Tel Aviv Magistrate’s Court Judge Ronit Poznanski-Katz said the suspicion is that Abramovici received tens of millions of dollars’ worth of diamonds from others, “sold them and pocketed the profits without paying the proceeds to the others.” A review of the file, she said, showed a reasonable suspicion that the diamond dealer had committed the offenses of which he is accused. 

Three complaints had been received, she explained, from three members of the Israel Diamond Exchange who gave similar accounts regarding Abramovici’s alleged conduct, relating to receiving diamonds, selling them and not transferring the proceeds. For his part, Abramovici confirmed that the sales were made, but claims that he has been insolvent since October 2015, and therefore did not pay the funds.

The Israel Diamond Exchange said several of its members alleged the Abramovici firm owed them “tens of millions of dollars” for gems it purchased but never paid for. The exchange’s board of directors “will show zero tolerance to anyone who brings harm to other bourse members,” Diamond Exchange managing director Eli Avidar said in a statement. 

Adi Carmeli, a lawyer for Abramovici, confirmed that his client was under arrest and said he denied any connection to criminal activity. He added that Abramovici filed for bankruptcy in late 2015. Another lawyer for Abramovici, Avichay Vardi, said that this was not a case of fraud but rather simply a case of a business that had failed.

“There have been a considerable number of business failures in the State of Israel involving much larger sums, in the billions, and no one turned this into embezzlement or a flagship case for eliminating the failures,” he said. “Business mistakes can be made and that doesn’t turn them into a scam.”

Israel is a world center for diamond cutting and polishing. Its diamond industry has traditionally been secretive but Avidar said a new board at the exchange has adopted a policy of full disclosure and transparency. “The Israeli diamond industry has been undergoing difficulties in the past several years and unfortunately we have seen cases where some elements have exploited this situation,” he said.

Israel’s net polished diamond exports fell 20% in 2015 to $5 billion due to weaker demand in Europe, Hong Kong and the United States and as prices for rough diamonds rose while polished diamond prices dropped. Manufacturers who cut and polish diamonds have found themselves caught between giant mining companies charging high prices for rough stones, and big retail chains that demand gems at low margins to keep sales moving.

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