Winsome Diamonds’ Mehta family face allegations of $1 billion fraud, have declared assets worth only $146 million

Jatin Mehta (Image source: Facebook/Jatin Mehta)

The owners of Winsome Diamonds and Jewellery Limited, Jatin Mehta, his wife Sonia, and sons Vishal and Suraj, have launched proceedings in the high court in London to be discharged of the Worldwide Freezing Order (WFO) for US$ 932.5 million which was made in May 2022. The Mehtas have maintained that the WFO was obtained through a private hearing without notice to them and that they had no opportunity to argue their case.

The Mehtas are being pursued by the seven entities they once owned/controlled in the UK and Ireland that were allegedly used to transfer proceeds of the fraud and were then placed into voluntary liquidation. These seven companies, which have been restored to the Register of Companies, are, along with two independent liquidators, the claimants in the big-ticket case which has over two dozen counsels crowding the courtroom.

The court was told that the Mehtas were complicit in a $1 billion fraud whereby banking facilities advanced to Winsome Diamonds and Forever Precious Diamonds were misappropriated and laundered through companies where the ultimate beneficiaries were the Mehta family. The court was told that a British Virgin Island-registered company Marengo Investment Group Limited which was accepted by the Mehtas as their “family owned company” received £163 million, while Al-Noora FZE based in the UAE received $650 million. Both Al Noora and Marengo were subsequently dissolved.

It is alleged that $162 million were transferred from Marengo to Oriental Expressions DMCC, which was owned by Sonia Mehta. A further $15,000 of Marengo’s receipts were paid into her bank account in the UAE. However, in submissions made before the court, the Mehtas deny any relationship with Al Noora, which they say belonged to Haytham Obidah, a former business associate, whose whereabouts are still not known.

It is a “good arguable case that the Mehta family were also behind this company,” the claimants said in submissions to the court. “Like other companies involved in the laundering process, Al Noora was established by Jatin Mehta before being transferred into the name of Mr Obidah.” The Mehtas, represented by Justin Higgo, King’s Counsel, deny that Al Noora was owned or controlled by the Mehta family.

The other companies whose names came up as having connection with the Mehta family and which allegedly received the proceeds of fraud are: IIA Technologies, based in Singapore, which received US$8.42 million; Polishing Technologies, Singapore, which received US$ 7.42 million; PDC Limited, based in Hong Kong which received US$7.33 million; Su-Raj India which received US$5.58 million; JRD International based in the Bahamas which received US$4.5 million. As stated earlier, another set of UK and Ireland registered companies were used to allegedly launder the fraud proceeds, adding further complexity.

The Mehtas are seeking to quash the freezing order, which has, among other restrictions, put a cap on their spending, by arguing that the court has not been given proper and complete disclosures. Higgo told the court that the alleged fraud was known at least since 2013 and pointed out that it has taken too long to bring proceedings against the Mehtas. He also pointed out that there was mischaracterization in what the court was told.

The Mehtas have only disclosed assets worth $146 million, while facing allegations of a US$1 billion fraud. The liquidators say that disclosures received from banks where the Mehtas have their accounts present a different picture. They cited a bank in Singapore which disclosed documents (dated 2013) showing Sonia Mehta’s estimated wealth at $425 million. The liquidators have sought to impress upon the court that the Mehtas need to make proper disclosures about their assets.

“There is a strong prima-facie case of fraud. There is a body of evidence before the court,” said Ewan McQuater, KC, representing the liquidators. A huge thrust of McQuater’s submission was that there was no element of non-disclosure. “Full and frank disclosure does not extend to detailed analysis of every point,” said McQuater.

This is just the beginning of a long and complex process of litigation that will make the rounds of the courts in London. The case has its genesis in the precious metals facility between Winsome Diamonds and Standard Chartered Bank (SCB) which was entered in October 2008. According to this, SCB provided bullion loan facilities to Winsome which was secured by standby letters of credit issued by a consortium of banks. Forever Precious, another company, which was also owned by the Mehtas, entered into a similar facility. In 2013, Winsome and Forever defaulted on repayments to SCB, which led to the consortium meeting the obligations under the standby letters of credit.

Winsome and Forever owed US$720 million and US$388 million, respectively, to the banks and were ultimately placed into liquidation in September 2020. The Mehtas claimed that they supplied jewellery to UAE-based companies that defaulted and hence they were unable to pay the banks. The CBI and ED held that the UAE companies were linked to the Mehtas and were part of the conspiracy to defraud the banks. But now, away from the UAE and India, the case continues to unravel in London.