Lugano Diamonds is facing a lawsuit from an investor who provided more than $3 million to the company as part of a joint deal to manufacture jewelry and split the profits.
Kristoffer Winters alleges he entered into an agreement with Lugano in March whereby he would provide an up-front payment of $3.1 million to purchase three diamonds. Lugano would then set the diamonds into rings and sell them for a profit, which it would divide between the two parties, according to a lawsuit filed recently in a California court. Winters would recoup his initial investment, Lugano would receive compensation for the cost of making the jewelry, and the parties would split the remaining profit from the sale 50-50, the filing stated.
Former Lugano CEO Mordechai (Moti) Ferder, and his companies, the Haim Family Trust and Simba IL Holdings, guaranteed the agreement. The contract also contained a “put right” clause that allowed Winters to ask for his initial investment back at any time, which he would receive within five days of the request.
However, in May, Ferder stepped down as CEO of Lugano as the company faced an internal investigation into financial irregularities uncovered by its parent company. At that time, Winters exercised the “put right” clause through a letter to current CEO Josh Gaynor, asking for $8.6 million, according to what he claimed he was due at the time, but he has yet to receive his money, the lawsuit claimed.
“Lugano Diamonds materially breached the agreement, including without limitation, by failing to timely pay Mr. Winters all money he is due and owed,” the filing said. “The actions of Mr. Ferder were malicious, oppressive, and taken in reckless disregard of Mr. Winters’s rights, so as to justify an award of punitive damages sufficient to punish and deter Mr. Ferder from engaging in such conduct in the future.”
Winter is asking for compensation for his investment, punitive damages and legal fees from Lugano and Ferder.
Image: A Lugano boutique in London. (Lugano Diamonds)