The thriller of the ‘vanishing’ diamond supplier: fury within the Metropolis after multimillion collapse of Vashi | Retail trade

For John Caudwell, the giveaway was the bespoke diamond ring. One in all Britain’s wealthiest males had determined to place his funding in a diamond retailer known as Vashi to the take a look at with some thriller procuring.

“I requested them to design a hoop for me. It was horrible,” says the founding father of Telephones 4u. “They claimed to be consultants in design however the customer support was poor – it was sluggish, not efficient and never a superb design.”

The billionaire determined to dig deeper, paying a go to to Vashi’s flagship London retailer in Covent Backyard. He stood exterior, counting what number of consumers went in, and says that from this snapshot he couldn’t perceive the corporate’s gross sales claims: “It simply didn’t add up.”

Caudwell had already invested £1m in Vashi, after its diamond-trader founder, Vashi Domínguez, wooed him throughout the pandemic – and got here with a promise of donating, additionally promising to donate to his charity, Caudwell Kids. (Caudwell claims Vashi’s charity donation was by no means forthcoming.) He says he was later requested for an additional £2m, however “they turned irritable once we wished much more element” and he didn’t stump up.

Now the tycoon is amongst a clutch of high-profile traders nursing losses after Vashi collapsed, leaving a path of economic wreckage behind it – and questions over the whereabouts of diamonds and jewelry as soon as valued at £157m.

Over greater than a decade, the charismatic jeweller had wooed a few of the UK’s finest identified entrepreneurs as shareholders – from Caudwell to shirtmaker Charles Tyrwhitt’s founder Nick Wheeler.

With its Covent Backyard retailer, and presence on social media, the model had been designed by Domínguez to disrupt the staid diamond commerce – providing jewelry designed for patrons at comparatively low costs, utilizing what it described as ethically sourced, recycled diamonds.

However now the liquidators have been known as in, questions have been requested over the existence of the lacking inventory – and traders, who’ve been left with an estimated £170m loss, have employed a non-public investigator to search out Domínguez. Of “Vanishing Vashi”, as he’s identified to some, there’s little hint.

Tenerife to Covent Backyard

Domínguez was born to a Spanish mom and Indian father on the island of Tenerife in 1978, attending the most costly college on the biggest of Spain’s Canary Islands. His education was paid for from the success of his late mom, an insurance coverage dealer who Domínguez has stated was the highest salesperson within the Canaries.

He studied legislation on the Universidad de la Laguna however left after two years and his first enterprise was promoting imported electronics on the island.

By 20, he had developed an curiosity in diamonds and travelled to the trade hub in Antwerp repeatedly, finally managing to purchase rocks wholesale for retail in Tenerife and gaining momentum. He talked of trying to maintain a low profile for concern of being the goal of thieves whereas carrying as much as £10m of stones in a briefcase.

His first million-pound revenue got here on the age of simply 23, having noticed two companies in Spain and one in Portugal on the verge of liquidation. After swooping on their inventory, Domínguez celebrated with a weekend in a villa in Tenerife along with his future spouse, Tammy. “I used to be within the lucky place the place I used to be capable of capitalise on a chance,” he would later recall.

In 2007, he arrange Diamond Producers – a direct gross sales enterprise and the automobile which might later grow to be the holding firm for the Vashi model.

He positioned himself as a diamond knowledgeable, securing a flood of media protection, with items within the Monetary Instances, MailOnline and the Guardian. He even appeared on This Morning, chatting with Holly Willoughby and Phillip Schofield whereas displaying a £5m crystal egg that he stated he was promoting for a billionaire in Canada.

Domínguez determined to complement his on-line mannequin promoting direct to customers on-line with outlets in prime areas, debuting in London on Piccadilly in 2016, and later opening shops within the Metropolis’s Royal Trade procuring centre and Canary Wharf, with concessions in Selfridges in London and Manchester.

In 2021, as retailers grappled with the pandemic, which was closing bodily shops, Domínguez doubled down and opened the glitzy “idea retailer” in Covent Backyard. Its diamond-encrusted jewelry was fastidiously displayed throughout two flooring, whereas craftspeople, which Vashi described as “alchemists”, occupied workbenches.

It was all designed to convey a message of unique individuality: clients may write love messages which had been then displayed on a digital wall; even the shop’s scent had been meticulously deliberate. “We’re making an attempt to create an area that’s partaking, inspirational, very immersive and clear, and we’re making an attempt to demystify the entire trade,” Domínguez stated in a promotional video.

The awards – and the rewards – rolled in. Vashi was named one among 15 firms most certainly to grow to be “unicorns” – price greater than $1bn – by Forbes. Domínguez was a regional winner in EY’s prestigious entrepreneur of the yr prize in 2021.

A dividend of £213,532 was paid to Domínguez in 2021, on prime of one other of £208,751 a yr earlier. Domínguez took frequent household holidays to seashore locations within the Caribbean and Mexico, and professed a “weak spot for automobiles”. He owned a Maserati Quattroporte, which promote for greater than £100,000.

“Vashi was a really spectacular particular person – intense and assured – who appeared to know his enterprise very nicely,” says Michael Moszynski, an entrepreneur and founding father of the company London Promoting, who invested three years in the past.

The fundraising push

Vashi’s rise to prominence got here in opposition to the backdrop of steady fundraising efforts, attracting a number of star backers.

Among the many massive names, Icap billionaire Michael Spencer’s household workplace held inventory however offered out; Boohoo founder Mahmud Kamani was reportedly given shares; and William Jackson, founder of personal fairness agency Bridgepoint, was additionally an investor. Spencer, Kamani and Jackson declined to remark.

Charles Tyrwhitt’s Wheeler says Domínguez, with whom he as soon as performed tennis, arrived at his home for lunch in a £400,000 Ferrari. He says Domínguez was “at all times” asking for additional funds. “My spouse is an excellent choose of character … she stated ‘get your cash out’. He was extraordinarily convincing at first. However I stored asking why he wanted a lot inventory, and the solutions had been implausible. He requested me for extra money, and I stated no. I would really like him to clarify what he has carried out.”

One rich particular person who put in additional than £1m claims Domínguez had boasted in 2022 that, if the corporate may efficiently launch within the US, a deal to be acquired by Cartier’s proprietor, Richemont, had been informally agreed. “Vashi was flamboyant, personable and had a powerful background and pedigree,” says the investor, who requested to stay nameless.

An investor presentation from 2021, seen by the Observer, acknowledged that there was a “clear path to exit with expressed commerce curiosity”, suggesting {that a} purchaser was lined up and that traders may money out.

The presentation boasted that Vashi had a larger gross sales density – income per sq. metre of area – than Tiffany, the trade chief.

John Ames, a seasoned digital govt, was employed as chief know-how officer in summer season 2021 and recollects assembly Domínguez within the Covent Backyard retailer. “He turned up with a £60,000 gold watch on his wrist,” says Ames. “He was very easy, with visionary speak about what he wished to do with the enterprise.

“He was a diamond dealer and now wished to construct a model.He informed me he anticipated an exit to a luxurious model the place Vashi may slot into their retail actual property.”

However inside weeks, alarm bells rang. “There was no governance: no board conferences or board packs produced, and no simply accessible monetary reporting,” Ames claims.

Audited accounts for Diamond Producers Ltd, filed at Corporations Home, confirmed full-year gross sales had been up 97% in 2021, at £105.4m, from £53.6m in 2020. Pre-tax income hit £14m in 2021, up from £4.9m in 2020. The corporate was aiming to boost £24m to fund high-end New York retailer openings, and £51m to purchase inventory – a £75m fundraising spherical which started in 2021 and valued the enterprise at £250m. Vashi hoped to open in Japan, and have 200 shops in 15 international locations “within the close to future”.

Seller loses sparkle

The cracks began to indicate in December 2022, when Vashi was the topic of a winding-up petition from one among its landlords, Canary Wharf Retail. Vashi owed it greater than £250,000, and an additional £3.5m to different collectors, together with diamond suppliers, in keeping with a witness assertion submitted by Domínguez to the winding-up listening to.

He requested for extra time for Vashi to repay its money owed. Covid had hit footfall and rates of interest had risen on its borrowing, he argued. Because of this, he stated, he was slicing its workforce by half to 100 workers and delaying the US growth.

Regardless of his plea, liquidators from the restructuring agency Teneo had been appointed in April 2023. Domínguez disappeared shortly after that, sources say.

Liquidators rapidly discovered that it could not be viable for the agency to proceed to commerce as there was “no obtainable funding nor any certainty across the prospects of buying and selling profitability”, their report says.

One other early job was to safe the diamonds, jewelry and enterprise information, visiting all websites within the course of and accessing safes. Workers had been requested whether or not any additional belongings may be discovered off website.

Disparities quickly emerged. The 2021 accounts, audited by a small agency known as Inger & Co (I&C), reported the worth of Vashi’s inventory was about £129m. Inventory stories by I&C valued the inventory at £149m in October 2022, after which £157m in February 2023, together with £120m in unfastened diamonds. The agency, whose workplace in Ilford, east London, is sandwiched between a Londis retailer and a grocer, didn’t clarify how the inventory had been valued within the accounts and inventory stories.

Nonetheless, liquidators notice: “The inventory collected was deemed to be considerably decrease worth than that famous within the 2021 accounts” and that that they had discovered no proof that “such a stage of belongings” had been owned “at any level within the firm’s historical past”. When specialists enlisted by the liquidators valued the inventory and offered it through public sale they realised a price of simply £147,000.

That left traders fuming. “The impartial valuation of the diamonds that they had in inventory gave me confidence that, even when the enterprise failed, I might get most of my a reimbursement,” says Moszynski.

Teneo says it’s “unsure” whether or not claims for £2.5m from major collectors might be paid. Furthermore, it doesn’t anticipate to have the ability to return the £4.6m owed to HMRC or the 275 claims for a complete of £162m from unsecured collectors.

“I’m offended with Vashi, the auditors, the gem valuers and people round him; this appeared a sound funding,” says Moszynski. “Traders are actually calling him ‘Vanishing Vashi’.”

Some traders have felt let down by one other member of the Vashi group, Charles Leach, who they are saying helped persuade them to plough in cash. Leach, who was listed as chief monetary officer (CFO) in investor supplies, described himself as “guide CFO”. Leach claims he had no entry to inner firm monetary paperwork, and that he misplaced his personal cash in Vashi’s collapse and feels “used” by its founder. “It’s arduous to place into phrases the trauma of this expertise,” he says.

Traders say additionally they raised issues straight with Domínguez over I&C. They argued that, as a small operation, it was unsuitable to approve accounts for such a big firm. I&C declined to remark.

Traders consider the corporate raised a minimum of £120m in convertible mortgage notes, in addition to an additional £50m raised in 2022, placing the loss at about £170m if nothing substantial is recovered. One US household workplace alone sunk greater than £10m in, a former worker says.

Finally, it’s unclear the place that cash has been spent, and, if the enterprise ever owned diamonds price greater than £100m, the place they’re now.

Sources near the corporate additionally allege Vashi employees had been requested to pose as clients so as to make the shops seem busier than in actuality. A publish on the office assessment website Glassdoor makes the identical declare.

Searching Domínguez

Some traders employed a non-public investigator to search out Domínguez however determined in opposition to “throwing good cash after dangerous” after preliminary work. A number of sources consider he’s in Dubai – a well-liked vacation spot for the tycoon when away from the household house in central London.

The Observer tried to achieve Domínguez through two London addresses. At one, a lady claimed to don’t have any data of him.

Traders are actually nursing their losses. “A number of the skilled traders are merely embarrassed that this has occurred,” says one creditor. One other says: “What gave me encouragement was that there have been seasoned traders already within the enterprise.”

The previous Pret a Manger boss Clive Schlee, a member of the registered collectors’ committee, says: “I’m over it. I haven’t received any remark to make.”

Caudwell, with an estimated fortune of £1.5bn, is comparatively unconcerned by the monetary loss. “We did a good quantity of due diligence – clearly not sufficient, however there’s solely a lot useful resource you possibly can put right into a £1m funding,” he says.

Moszynski says: “When Vashi was issued with a winding-up order, it was a shock: the audited accounts had boasted of wholesome progress with revenues of greater than £100m. From the liquidators’ report, it appears to be like just like the traders will get nothing again.

“It’s crucial that the collapse of Vashi is investigated by the authorities to present individuals confidence in investing within the UK sooner or later. This isn’t nearly [protecting] traders, however safeguarding job creation and tax revenues that pay for the NHS and extra.”

He has submitted a criticism and proof to the UK’s Critical Fraud Workplace. The SFO declined to say whether or not it could examine.

Ames says: “What made me actually offended was there have been so many good individuals in that enterprise: younger, motivated, inspiring. That was actually upsetting.”