The business – which was registered as Online Diamonds International Corporation and formerly operated a showroom in Times Square – filed for Chapter 7 bankruptcy in a New York court on 20 June. In the filing, it was listed as having debts of US$1.7 million (AU$2.4 million).
A Chapter 7 bankruptcy does not involve a repayment plan; instead, it enlists a trustee to sell the debtor’s assets and use the proceeds to pay creditors. It is mostly equivalent to liquidation under Australian law.
The news came after six Enchanted Diamonds’ customers complained to the media that they had paid thousands of dollars for engagement rings that never arrived.
Another customer reportedly filed a lawsuit against Enchanted Diamonds in the New York Supreme Court over a US$35,000 (AU$50,000) custom ring that did not materialise.
In the weeks prior to the bankruptcy filing, the business had reportedly stopped answering calls and emails from customers. Its website, enchanteddiamonds.com, is no longer functional and simply displays the message: ‘We are not accepting orders at this time’.
An Enchanted Diamonds staff member reportedly told one disgruntled customer that all employees had been suddenly sacked in mid-June, and that the return of any money would have to be pursued through law enforcement.
Enchanted Diamonds was founded in 2012 despite using the phrase ‘established 1874’ in its marketing, as co-founder Joshua Niamehr’s family has reportedly been in the jewellery industry for generations.
When asked about the missing rings, Niamehr, who was president of the business at the time of its collapse, told the New York Daily News: “There’s no fraud here, no scam.”
However, at the time of publication he had not offered any information about whether customers would be refunded.
Niamehr reportedly blamed a soured relationship with online platform Rare Carat for the business’ problems.
Rare Carat bills itself as ‘a search engine that helps anyone buy diamonds from any retailer intelligently’. The company had listed Enchanted Diamonds as a trusted retailer, recommending it to shoppers, until May 30 of this year when it was removed for breaching the platform’s listing rules.
Ajay Anand, CEO Rare Carat, categorically refuted claims that his company was in any way responsible for the missing rings.
“We have listed this website for two-and-a-half years and never had a problem with them,” he told JCK Online. “This is a big problem for the industry – how do you know [if a business is about to collapse], in cases like this?”
Anand added that Rare Carat had contacted federal prosecutors over Enchanted Diamonds’ business conduct, and enlisted a lawyer to help customers recoup their lost money from the retailer.
Previously, Enchanted Diamonds had received glowing five-star reviews online from customers praising its low prices and professional service.