Buyer Beware!!

Posted on 26 February 2016

Reported from the JCK Online News.

It all started a few weeks back with a listing on Chinese e-portal Alibaba touting “CVD Lab Grown Diamonds with GIA Natural Certificate[s].” The offering—billed as a “top product of the week,” no less—piqued the interest of veteran diamond industry journalist Chaim Even-Zohar, who called it a “blatant attack on the Gemological Institute of America’s product integrity,” comparing it to a ham and cheese sandwich marked kosher.

The listing has since been yanked from Alibaba. But with a few seconds of Googling, I found a similar listing (pictured, right) on IndiaMart, which describes itself as India’s largest online market. At press time, that is still up.

In a series of articles in his Diamond Intelligence newsletter—you can read the first one here, and summary of the follow-up here—Even-Zohar detailed how he corresponded with the company in question, at one point asking for confirmation that “[these] CVD goods come with a GIA natural diamond certificate?” He was told, “Yes.”

This listing raises a few questions: First, we don’t know whether this company or person has actually sold any lab-grown diamonds with reports for natural gems—or even had any to sell. This is someone offering a product that can be used to deceive. It is quite possible that person may also deceive his buyers.

But Even-Zohar believes the offer was—in a manner of speaking—legit and that, yes, sales were made.

“There were several websites connected to this product operating for well over one year,” he tells me. “Alibaba had not a single complaint from a customer. The bank account was, before we reported the story, an account in ‘good standing.’… If this order was a scam that didn’t deliver, it would have been discovered much earlier, and there would have been complaints.”

So, assuming this person really was selling this “kosher ham” combo, how did the website obtain lab reports for natural diamonds to match with nonnatural stones? Even-Zohar doesn’t believe that the GIA was “fooled” by any of the stones, as the company claims on its site and IndiaMart listing; at least one report was attached to a type I stone, and those diamonds can’t be grown by CVD. The reports in question may have also been counterfeited.

But more likely, he feels, this points to an after market for GIA reports. As a jeweler put it, if you have a tennis bracelet with dozens of diamonds, the consumer doesn’t receive reports for each one. So what happens to the extras? In some cases, it appears, they are sold.

“The fact that there is solid and sustained demand for ‘empty’ certificates—i.e., genuine GIA reports without the diamond—is a confirmed fact,” Even-Zohar tells me. “These sales take place in mostly Hong Kong and Mumbai, but, maybe, also elsewhere. Early reports about this mentioned $50 per certificate. But the several hard confirmations we have talk about $100 (or about 5,000–6,000 rupees) per certificate. This demand is real, and the assumption that thousands of certificates have been sold is reasonable. By definition, it is both self-evident and quite axiomatic, anyone buying empty GIA certificates does so for criminal reasons. Having these certificates without the stones cannot serve any legal or proper business purpose.”

(There have also been reports, we should note, of trading in “empty” Kimberley Process certificates: “Leftover [KP] certificates from shipments intended for domestic sales are reused to smuggle conflict stones out of the country, providing another laundering avenue,” wrote Foreign Policy in 2013.)

At this point, we don’t know the scale of the wrongdoing here; it is even possible not much wrongdoing has taken place, aside from some ill-advised online listings. Still, this is troubling news that the leading diamond organizations have already reacted to. Both GIA and Alibaba say they are investigating.

 Link JCK

Rob Bates | February 26, 2016 | CUTTING REMARKS

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