SEC sues Lugano ex-CEO over $1bn of fictitious revenue
The complaint, filed 31 August in California, covers conduct from 2021 to 2025. A restatement later cut Lugano's net assets at acquisition from $179 million to $5 million.
By The Retail Desk
What changed
The SEC filed. Its complaint says Mordechai Ferder ran a fraud from 2021 to 2025 that had Lugano Diamonds and its listed parent book more than $1 billion of fictitious revenue. He denies it.
What it means
- If you finance stones for clients: the complaint describes investment contracts on diamonds nobody bought. Get the stone identified and vaulted.
- If you hold CODI paper: the restatement is the number, not the headline.
- What this is not: a verdict. These are allegations, untested in court.
Key figures
| Fictitious revenuebooked by Lugano and CODI | $1bn+ |
|---|---|
| Net assetsrestated down from $179m | $5m |
| Revenue erasedof Lugano's post-2021 sales | 85% |
| CODI paidfor 60% of Lugano, 2021 | $104m |
Source: SEC Litigation Release 26625 - complaint filed 31 Aug 2026, released 1 Sep 2026
The money was never diamonds
Investors funded stones. The Commission says Ferder told individuals their money would buy specific diamonds, and that he would find a buyer or set the stone in jewellery. Neither happened. Repayments came from later investors.
Then it became revenue. Those investor funds were recorded as sales, and the repayments were disguised as inventory purchases. That is how a private jewellery business inflated a listed parent's accounts.
| Measure | Figure |
|---|---|
| Fictitious revenue booked by Lugano and CODI | over $1 billion |
| Net identifiable assets at acquisition, as first stated | $179 million |
| The same assets, after Compass Diversified's restatement | $5 million |
| Lugano revenue erased from post-acquisition accounts | over 85% |
| Compass Diversified's 2021 payment for 60% of Lugano | $104 million |
Source. SEC Litigation Release 26625 and the complaint in SEC v. Ferder, No. 8:26-cv-02492 (C.D. Cal.), 31 August 2026.
The $104 million. is JCK's figure, 4 September 2026, not the Commission's.
The restatement is the scale
Assets restated down. Compass Diversified corrected Lugano's net identifiable assets at acquisition from $179 million to $5 million. That is a fall of 97%.
Revenue went too. The parent erased more than 85% of the Lugano revenue reported after the acquisition. In June 2026 it said it would liquidate the business.
What the Commission wants
Bar and disgorgement. The complaint seeks permanent injunctions, disgorgement with interest, civil penalties, and an order barring Ferder from serving as an officer or director. Three family trusts are named as relief defendants.
He denies it. Ferder's lawyer says he denies the allegations and will set out his defence in court. The investigation is open, and none of the claims has been tested.
What to watch
- 9 SepSignet's second-quarter results, the next large listed jeweller to report.
- No date setFerder's answer in the Central District of California, case 8:26-cv-02492.
- OpenThe Commission's investigation, which its release says is continuing.
The story so far
- One fund cut 806,676 Signet sharesWho owns the listed jewellers, and who sold.
- Shoplifting falls 12.4%Theft moves from the shop floor to the ledger.
- The 80% closing-down sale that was never a shopA jewellery storefront that did not exist.
Go deeper
What would change this call
A court finding that Lugano did own the diamonds behind the investment contracts, or evidence that the restatement itself was wrong. Either would remove the central allegation, and the reading above would go with it.
How an investment contract in a diamond works
Money is handed to a dealer to buy a named stone, with a promise to resell it or set it in jewellery and share the gain. That promise of profit from another's effort is what makes it a security, which is the Commission's route in. The complaint says the stones were never bought.
Method
The 97% fall is Carat Capital's arithmetic on the Commission's own two figures: $5 million against $179 million is a decline of 97.2%, rounded down to 97%. The Commission states the revenue erasure as "over 85%" and no residual is computed from it here. The $104 million paid in 2021 for 60% of Lugano is JCK's figure, not the complaint's, and is marked as such in the table.