Editor’s Note
This article details the complex legal and financial troubles surrounding Lugano Diamonds, once a star investment, and the disputed ownership of a rare, multi-million-dollar blue diamond.
For several years, Lugano Diamonds was considered a jewel in Compass’s investment portfolio. Then came lawsuits, accusations of fraud and theft, restated financial statements, a bankruptcy filing, and a rushed sale.
The diamond was a 6.43-carat, sophisticated intense blue pear-shaped stone, internally flawless, set in a ring, and valued at nearly $11 million. In a lawsuit filed in July, New York City-based Scarselli Diamonds claims to have sent the stone to a showroom called Lugano Diamonds in Miami in January 2025, but only after conducting months of due diligence on Lugano, completing 14 other consignment transactions worth $44 million with them, and receiving confirmation that Lloyd’s of London would cover its value if anything went wrong. When Scarselli sent the diamond to Lugano’s CEO, Mordechai “Moti” Ferder, on January 28, 2025, it was allegedly to show it to a potential buyer in Miami and then return it if requested.
So it was a surprise when, in late February, Scarselli asked Lugano to return that diamond and several other consigned pieces in time for the Hong Kong jewelry fair in March, and everything was returned except the blue diamond.
In April, days after Forbes presented Ferder and Lugano’s incredible success—based on audited results filed with the SEC—Lugano’s parent company, the investment firm Compass Diversified, apparently received a tip to further investigate how its star CEO was financing inventory. The shrewd diamond chief was visiting his native Israel at the time and never returned. Compass, along with other Lugano executives, quickly initiated a forensic accounting investigation that found irregularities in sales, cost of sales, inventory, and accounts receivable.
They determined that Ferder had “created fake sales transactions to inflate its reported revenue,” sold inventory that did not exist or did not belong to Lugano, and entered into numerous undisclosed financing agreements with third parties that were kept off Lugano’s balance sheet.
In May, Lugano—now led by former Bulgari executive Josh Gaynor, who had joined Lugano the previous year—admitted it did not know the whereabouts of numerous diamonds (including Scarselli’s blue diamond). Scarselli sued Lugano, Compass, and Lloyd’s two months later in Orange County Superior Court for $13.5 million, describing the missing blue diamond in the lawsuit as “a gem that may not have an equal for decades.” Via email, jewelry store owner Davide Scarselli declined to comment. He is one of two dozen diamond investors who claim Lugano owes them $1.5 million or more.
In its lawsuit against Ferder, Lugano, which closed showrooms in London, Connecticut, and Washington, D.C., but still operates six others, plus a mobile equestrian boutique, accused the former CEO of stealing the blue diamond. Lugano filed for bankruptcy (Chapter 11) in November. In mid-January, it was sold to a division of Gordon Brothers, retail store liquidation specialists.
While there are many losers from the alleged fraud at Lugano, the biggest of all is Compass Diversified, a publicly traded investment company (commonly known by its symbol CODI) that holds controlling stakes in middle-market companies like canned soda maker Sterno Products.
In September 2021, Compass paid Ferder $198 million in cash for a 60% stake in the Newport Beach, California-based jeweler.
At that time, Compass was booming, reaching its market capitalization peak in December 2021 at $2 billion.
For a few years, Lugano seemed to be a shining jewel in Compass’s portfolio. It ran ads featuring Mike Bloomberg’s daughter, Georgina, a renowned equestrian, as well as billionaire Sheila Johnson. And it seemed wealthy enough to donate $30 million to dozens of non-profit organizations, including $1 million for an Orange County music school and $2.5 million to make admission to the Orange County Museum of Art free for 10 years. Its revenue grew 50% to $471 million in 2024, and EBITDA skyrocketed to $195 million, up from $30 million in 2021.
These stellar results from Lugano made it easier for Greenwich, Connecticut-based Compass to finance the rest of its diverse businesses (it currently holds stakes in eight companies, including Sterno; PrimaLoft, a maker of insulation material used in down jackets for brands like Patagonia, Helly Hansen, and Lululemon; and the feminine hygiene products company Honey Pot).