It started in New York, says Chaim Even-Zohar in an article posted on May 22 by www.israelidiamond.co.il., courtesy of Diamond Intelligence Briefs. A respected diamond merchant bought in the market a parcel containing about 1,000 of what he believed were – and were offered as – natural polished diamonds in sizes ranging from 0.30 carats to 0.70 carats. The colors ranged from F to J – colorless or near-colorless. They were of high quality and the buyer decided to submit the stones to the IGI laboratory in Antwerp for certification.
There, it was discovered that the submitted stones involved a mixed parcel of natural and synthetic diamonds. Well over 600 diamonds were actually man-made. But these diamonds were not just “ordinary” synthetics. The clarity range was VVS-VS. Internal characteristics were feathers, pinpoints, and small dark crystals. All these inclusions are strikingly similar to natural inclusions; hence, says the IGI lab, microscopic observation is insufficient to conclude whether they are natural or synthetic. The polish, symmetry and cut were either “Excellent” or “Very Good.” They showed bruted or faceted girdles.
The “problem” is with the impurities, which were apparently intentionally introduced in the synthetic production process not to make the stone more beautiful but solely to make the stone look more natural. As one source that saw the stones observed: “They were created to defraud.”
The merchant who purchased the goods made a selection from an offering many times larger. This leads one to believe that the actual quantity of undisclosed synthetics in the market may run in the many thousands of stones worth many millions of dollars. The trade is facing a major challenge!
The goods were fully priced. According to a London trading source, the price differentials between natural diamonds and similar diamonds offered for sale on a U.S. synthetic polished website is about 50 percent. In many instances, diamonds as small as 0.30 carats are not submitted to labs for certification. In this instance, the diamond merchant who bought the stones made a lucky decision that probably spared his business from enormous future embarrassment and legal entanglement. Upon discovering well over 600 undisclosed synthetic stones, the Chairman of IGI, Roland Lorie, immediately informed De Beers and the leadership of the diamond industry.
De Beers Warned Clients
The sale of these diamonds in New York took place about six weeks ago. A few industry leaders were “in the loop” and actively deliberated what the next steps should be. Within days after learning of what happened, the DTC took action and released an alert to its sightholders. It was a unilateral move, not really coordinated with industry.
In its alert headed “Undisclosed submissions of CVD synthetics to grading laboratories,” De Beers states as follows: “DTC Research Centre has been notified of three recent instances of undisclosed submission of CVD synthetics to grading laboratories in Belgium, India and China. In each case the synthetics had very similar characteristics and may therefore have had a common source.”
Diamond Intelligence Briefs (DIB) has learned that the submissions at the non-Antwerp labs involved fewer stones. (Also, there is an additional submission that is still being investigated. It involves a non-disclosed synthetic stone weighing two carats(!) submitted to the GIA lab in India.)
Regarding the three submissions cited by De Beers, the statement cautions that “the DiamondView and photoluminescence results indicate that the CVD synthetics have been heat-treated post synthesis and we note that the combination of characteristics listed above is strikingly similar to that reported by the GIA [Wang & Moses 2011] for 16 CVD synthetics received from Gemesis Corporation.”
IGI Notified all Global Gem Labs
IGI principal Roland Lorie and the lab’s global head, Herman Brauner, quickly followed the De Beers action by alerting every gemological laboratory in the world. In a “dear colleagues” letter, they wrote that “during the past weeks, a few hundreds of CVD synthetic diamonds were submitted to IGI laboratories in Antwerp and Mumbai, with the clear aim to have these man-made diamonds certified as natural diamonds.
“In each case the synthetics had very similar characteristics and may therefore have had a common origin. IGI readily identified these as synthetic diamonds. The purpose of this lab alert is to warn members of the gemological community, and urge them to be particularly vigilant.”
Labs have a fiduciary responsibility to their clients; they are also contractually committed to confidentiality. They do, however, also have a larger responsibility to their profession and to the industry. Lorie and Brauner’s courage need to be acknowledged. They did more than just alert the labs. As they pointed out: “due to the recent volumes of man-made stones submitted, IGI management decided to liaise and consult with the Belgian Federation of Diamond Bourses (BFDB), DTC Research, and the AWDC. Additionally, IGI decided to share detailed scientific information with other gemological laboratories around the world, as we now suspect that the volumes of colorless synthetic diamonds being released on the global markets have increased noticeably, and may perhaps already be prevalent throughout the diamond centers.”
The IGI has enormous experience in recognizing synthetic stones, especially those created by Gemesis. Gemesis uses IGI’s New York laboratory to secure a Synthetic Diamond certificate for all of its lab-created (or cultured) diamonds of 0.25 carats and up. These polished are laser inscribed with an identity name and number as part of the certification process. Therefore, IGI is particularly well situated to recognize the most likely producer of the synthetics.
Criminal Complaints Must Be Filed with Police
Let’s face it: this regrettable and miserable mixing of natural and synthetic diamonds that were traded as naturals was something that was going to happen sooner or later. The writing had been on the walls. It always was a matter of “when” rather than “whether.” This requires the trade, the producers, the banks, the industry, the trade press – essentially all stakeholders – to make it abundantly clear that this kind of criminal behavior will not be tolerated in our trade.
The diamond bourses have extensive internal arbitration and dispute settlement mechanisms. Fraud cannot be arbitrated. Criminals belong in jail. The relevant diamond bourses and/or the World Federation of Diamond Bourses and/or the injured party himself must come forward and involve law enforcement. A crime has been committed. As far as we know, the Antwerp or New York police have not been called in yet – and members of the organized trade should ask their elected representatives: what are you waiting for?
Confiscation of the Undisclosed Synthetics
Those involved must, in first instance, be suspended or expelled from every bourse in the world. Every diamond trader – anywhere in the world – should refrain from doing any business with a party that for its own reasons of greed was willing to jeopardize the entire worldwide diamond consumer market.
At this point in time we don’t know how many diamond dealers have unwittingly sold synthetics under the guise of natural diamonds to retailers. There should be no hesitation by industry leaders; it is clear what needs to be done. There are no other options.
A member of the industry has been defrauded – in a massive way. The most obvious person to take action would be the diamantaire who purchased the goods. Now comes the catch: he bought the goods on 60 days credit. He hasn’t paid for the diamonds. The seller – quite obviously – would like the merchant to return the goods. The buyer has given his word that he will pay for the purchase.
Technically speaking, how does one export non-diamonds (synthetics) that have been cleared through the Antwerp Diamond Office as “natural diamonds”? Actually, false and fraudulent import documentation has been provided to the (governmental) Diamond Office. What action will it take? Or has action already been taken? The Diamond Office certainly is empowered to impound or confiscate the goods. The most logical course of action would be for the goods to be submitted to the police as evidence in a crime.
It is obvious that the industry did not have a contingency plan; it didn’t have a “blueprint” for what to do in such cases. That certainly must be remedied – and before the next event.
Detection is Possible – The Challenge is Not Insurmountable
Actually, the diamond pipeline has quickly identified the fraud. That is quite encouraging. The industry should take comfort in realizing that, in fact, detection has actually become quite easy. IGI detected the synthetics using De Beers’ detection equipment, and a vigilant trade using the same equipment could easily do the same. The industry is not at the mercy of fraudulent behavior. On the contrary.
De Beers and others have spent millions of dollars devising the equipment that can provide reassurance to both the trade and consumers. What the last few days have taught is that when detection equipment is used, this becomes a manageable problem with a strong deterrent. Detection is easy. It is up to the industry to keep our customers informed and to display the political and commercial courage to rise to the challenge posed by fraudulent undisclosed trading in synthetics.
