SEC Accuses Lugano Founder of Alleged $1bn Diamond Fraud

(IDEX Online) - The US Securities and Exchange Commission (SEC) has accused Mordechai Ferder, founder of the luxury Lugano jewelry company based in California, of orchestrating an alleged fraud in which investors were persuaded to put hundreds of millions of dollars into diamonds that, according to the allegation, neither he nor the company ever owned.

The SEC alleges the scheme caused Lugano Diamonds and its public parent, Compass Diversified, to record more than $1 billion of fictitious revenue in the company's financial statements.

The agency filed its civil complaint on August 31, 2026, and announced the action in a litigation release dated September 1, naming as defendants Mordechai Haim Ferder and Simba IL Holdings LLC, which the SEC says he controlled.

Ferder, aged 55, founded Lugano Diamonds & Jewelry with his wife, Edit, in 2004. The company became a high-end jewelry designer, manufacturer and retailer, with multiple US stores, a London store and an equestrian business, according to Lugano's bankruptcy filings and industry reports.

In 2021, publicly traded Compass Diversified acquired a 60% interest in Lugano in a transaction with an enterprise value of $256 million. Compass paid approximately $198 million in cash at closing, according to its SEC filing. Ferder retained a 40% interest and remained chief executive.

In early 2025, Compass began investigating Lugano's financing, accounting and inventory practices. Ferder resigned as CEO on May 7, 2025, and Compass said its previously issued 2024 financial statements could no longer be relied upon.

Lugano filed for Chapter 11 bankruptcy on November 16, 2025, and is now proceeding through a liquidation plan.

According to the SEC complaint, between 2021 and 2025 Ferder and Simba orchestrated a scheme involving purported diamond-investment contracts.

The SEC alleges investors were persuaded to invest hundreds of millions of dollars in diamonds that Ferder and Lugano never owned.

Investors were allegedly told that Ferder or Lugano would acquire the diamonds, find buyers for them, turn them into jewelry or otherwise increase their value.

The SEC alleges the diamonds were never acquired and that Ferder instead made what the regulator describes as "Ponzi-like payments" to investors. It further alleges that Ferder directed Lugano to record investor funds as revenue rather than debt and disguise repayments to investors as inventory purchases.

The SEC says those practices resulted in more than $1 billion of fictitious revenue being recorded by Lugano and Compass.

The SEC says Compass subsequently restated its financial statements, reducing the value attributed to Lugano's net identifiable assets at the time of the 2021 acquisition from $179 million to $5 million and eliminating more than 85% of Lugano's previously reported revenue after the acquisition.

The SEC complaint says Ferder left the United States around May 2025 and has not returned.

Ferder and Simba are named as defendants. Ferder's wife, Edit Fintzi Ferder, is separately named as a relief defendant in her capacity as a trustee of certain family trusts.

Ferder denies the allegations, according to his attorney, Jeffrey Reeves, who told Women's Wear Daily (WWD) that Ferder's defense will be detailed in court.

The SEC is seeking permanent injunctions, disgorgement with prejudgment interest, civil penalties and an order barring Ferder from serving as an officer or director of certain public companies. The allegations have not been adjudicated by a court.

Pic shows the Lugano store in Aspen, Colorado, USA.