Empire Diamonds Ltd, a London-based company which made false and misleading statements in persuading members of the public to invest in coloured diamonds, has been wound up in the High Court following an investigation by the Insolvency Service.
The company sold diamonds by way of a telesales operation, cold-calling members of the public whose details were obtained from purchased data lists. The investigation found that:
the companys promotional literature claimed a rate of return on investment of 15-25% per annum
these claims of investment growth were made to customers in circumstances where the company had already marked-up the diamonds on cost price by between 142% and 1289%
those customers who subsequently had their diamonds independently valued stated that they have been considerably overcharged. For example, one client was charged 11,850 but his purchase was independently valued at 1,352
aggregate sales were 187,538, representing a mark-up of 146,053 on an aggregate cost price of 41,485
falsified customer testimonials were displayed on the companys website
the company solicited investment from some customers on the basis that it would sell their existing diamonds, but then failed to fulfil this promise
the company operated with a lack of transparency as to ownership and control
Commenting on the case, Colin Cronin, Investigation Supervisor said:
Empire Diamonds Ltd obtained clients and made sales by making misleading, false and/or unfounded statements to them as to value of the diamonds and returns. As a consequence clients paid the company an exorbitant and unjustified mark up on the cost price of the diamonds.
These winding-up proceedings show that the Insolvency Service will take firm action against companies which mislead the public in this way.
The London Diamond Bourse has published advice with the objective of preventing the public falling foul of boiler room scams purporting to sell highly lucrative investment diamonds. I would encourage anyone who is approached by way of cold call and offered diamonds to refer to this advice before making any purchase.