Lawsuits place Newport Beach jeweler, philanthropist at center of fraud scheme
- Share via
A Newport Beach businessman has been named in numerous lawsuits alleging he engaged in fraudulent and illegal actions implicating the diamond business he founded in 2005 and the private-equity firm he sold the outfit to for $256 million in 2021.
Mordechai “Moti” Ferder, founder and chief executive of Newport Beach’s Lugano Diamonds & Jewelry resigned from his position with parent company Compass Diversified effective May 7 and, according to one lawsuit, is living abroad and transferring his assets out of California as legal threats mount.
Well-known in local philanthropic circles, Ferder was touted as the man behind the $2.5-million donation that allowed the Orange County Museum of Art to offer free admission for a decade after its grand reopening in 2022. Just three weeks before his resignation, the jeweler was profiled by Forbes on his many charitable causes.
UC’s Board of Regents could soon vote to merge the Orange County Museum of Art with UCI’s Langson Institute & Museum of California Art. The deliberations come as OCMA bids farewell to its leader and amid lawsuits against a major donor.
Multiple complaints filed in county and federal courts since early June contend Ferder entered into unpermitted outside contracts with wealthy individuals, soliciting funds to either acquire interest in or, with additional Lugano funds, purchase diamonds with the agreement the parties would split the profits.
Some of the transactions provided the third parties with initial returns, which Lugano alleges in its own lawsuit against Ferder were charged to the company as business expenses. But at some point, the funds ran out, leaving multiple investors holding the bag, suits allege.
Lugano’s filing accuses Ferder of fraud, concealment, civil theft and breach of fiduciary duty, claiming he not only illegally procured outside investments without approval from Compass Diversified, but falsely recorded at least $100 million in liabilities as incoming revenue.
“He forged invoices and sale documents, sent out empty box shipments, falsely recorded the money from the third-party individuals as revenue for Lugano, and concealed the repayment obligations from Lugano’s books,” the company’s legal team alleges.
Ferder could not be reached for comment.
An attorney with Brown Neri Smith & Khan, the Los Angeles law firm representing Lugano Diamonds & Jewelry, declined to speak with the Daily Pilot about the lawsuit. But the complaint claims Ferder has fled the country since resigning in May.
“He is currently staying in Tel Aviv, Israel, and appears to be in the process of moving his assets out of the United States and to Israel,” according to the complaint.
While it is unknown how many ventures Ferder may have engaged in, the activity is suspected to have taken place over several years, going back at least as far as 2020, according to one lawsuit.
Attorneys for Barry Aronoff, president of Costa Mesa-based Aronoff Capital, Inc., maintain that between June 19, 2020 and Nov. 16, 2023, Ferder approached the plaintiffs more than 15 times after an initial transaction, offering higher returns on investment.
“The value of the diamonds Ferder proposed acquiring on behalf of Lugano Diamonds increased over time to induce plaintiffs to give defendants more money in subsequent transactions,” the complaint reads.
The suit contends Aronoff Capital is owed nearly $4.6 million in outstanding payments, and plaintiffs are seeking treble damages — an amount estimated over $13.7 million.
Beyond the many side deals allegedly brokered, Lugano’s attorneys claim Ferder falsely claimed the transactions were ordinary sales and “manipulated Lugano’s internal accounting records to characterize the incoming funds as revenue.”
“By doing so, Moti misled internal stakeholders and auditors regarding Lugano’s actual performance and valuation,” the business’s attorneys argue.
The jewelry retailer’s suit against Ferder also describes an instance in which a New York diamond dealer, Scarselli Diamonds, was asked to furnish a gem to Lugano by Ferder, who claimed a buyer in Miami wanted to see the diamond.
After the object was shipped, however, Ferder allegedly rerouted it to another Florida address belonging to an entity called VAD & Company, though the transaction was never reported on Lugano’s records.
Lugano’s suit further maintains Ferder’s fraud and concealment of the outside contracts has exposed the company to numerous lawsuits from the third parties and caused “substantial reputational harm.”
“Some of the third parties have shown up to Lugano boutiques, yelled at and harassed Lugano staff and even threatened to call the police on Lugano employees,” it continues.
Meanwhile, the fallout on the financial futures of the Newport Beach retailer and its parent company appear vast, as Lugano’s interim chief executive previously told the Orange County Business Journal the company was actively engaged with potential buyers and looking to downsize its workforce by 25%.
Compass Diversified Holdings is meanwhile a named defendant in a class action complaint filed with the U.S. District Court by attorneys representing shareholders who purchased publicly traded Compass securities between May 1, 2024 and May 7, 2025, under false pretenses.
“Had [class members] been aware that the market price of the company’s securities had been artificially and falsely inflated…they would not have purchased the company’s securities at the artificially inflated prices that they did, or at all,” the class action complaint reads.
In the same May 7 statement in which Compass announced Ferder’s resignation, officials disclosed non-reliance on the company’s 2024 financial statements and announced that “amid an ongoing internal investigation into its subsidiary Lugano Holding, Inc.,” that it would delay its first-quarter filing for 2025.
“What has been uncovered through the investigation thus far does not reflect who we are as a business and the values we uphold,” said CEO Elias Sabo.
The Business Journal reported that in the 33 trading days after the statement was released, shares in Compass Diversified had fallen 64% to $6.26, while its market capitalization had plunged by roughly $700 million.
