According to initial reports, the value of the diamonds and cash involved in the alleged fraudulent activity at the Israel World Diamond Exchange in Ramat Gan, east of Tel Aviv, could amount to up to $55m-$65m (£38m-£45m).

A well-established diamond dealer, Hanan Abramovich, allegedly acted as a middle man and failed to deliver cash and promised diamonds to other dealers.

He appeared before court on Wednesday to have his arrest extended for two days on suspicion of fraud worth dozens of millions of dollars, according to court reports. He claims business problems not criminality are behind the complaints.

The Israel Diamond Exchange was established in the late 1960s and is now the largest diamond trading centre in the world. Its buildings cover 80,000 sq metres and house approximately 1,050 diamond companies. It accounts for the import of $5bn in rough diamonds annually – around 40% of global rough diamond production. Israel’s diamond trade is valued at $10bn annually.

The exchange’s management said the investigation had been launched after a number of dealers complained they were owed tens of millions of dollars for goods sold to Abramovich’s company.

Eli Avidar, the managing director, said: “The diamond exchange’s management will show zero tolerance to those who hurt other members of the exchange. Israel’s diamond sector has been going through difficult times in recent years and to our regret we are being exposed to unfortunate instances like these where the situation is being exploited.

“The diamond exchange management will work resolutely to clarify the case, including working with the enforcement authorities.”

In an interview with the Hebrew-language business newspaper the Marker, Avidar said the exchange’s management had been approached by other companies who complained that they had not received money and diamonds promised by Abramovich over a period of months.
“They believe it is a fraud and last month he gave 10-12 different explanations to sellers that he needed to receive money from Hong Kong and then receive rough diamonds, none of which happened.

“He continued taking more without paying. When we contacted him several days ago he said people would have money in the bank tomorrow. At the exchange, people believe that this is a fraud and he is hiding diamonds and money somewhere.”

Abramovich’s lawyer, Avihai Vardi, denied to the same publication that the money and diamonds had been stolen and insisted his client’s business had simply “failed”.

It is not the first scandal to hit the exchange in recent years. Four years ago an alleged tax avoidance was discovered. Individuals are still facing charges over illegal cheque cashing and a service in fake invoices.

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