By Michelle Graff
Minneapolis--A former executive of two synthetic diamond companies is facing federal fraud charges for allegedly embezzling millions from investors who thought their money was being used to buy diamond growing equipment.

The U.S. Attorney’s Office in Minnesota announced last week that 64-year-old Edward S. Adams of Minneapolis is charged with eight counts of mail fraud and six counts of wire fraud in a scheme that dates back to 2006 and involves both Apollo Diamond Corp.--which was founded by his father-in-law, Robert Linares--and its successor, Scio Diamond Technology Corp.

Also revealed by the U.S. Attorney’s Office in a news release about the indictment: Adams is a professor of law.

Richard T. Thornton, FBI special agent in charge of the bureau’s Minneapolis Division, expressed shock and disappointment about the charges. “The defendant’s brazen theft of millions of dollars of investors’ funds over the course of several years is compounded by the fact that he holds positions of public trust as an attorney and law-school faculty member.”

Adams became involved with Apollo Diamond Corp., a lab-grown diamond company based in Boston, in 2003 through his father-in-law, Linares.

According to the U.S. Attorney’s Office, Adams held various positions at Apollo, including chief financial officer, secretary, executive vice president and general counsel. The company tapped his financial services firm, Equity Securities Inc., to provide investment banking services and raise money for the company.

Equity Securities raised more than $25 million for Apollo and received about $4 million in commission.

After that, Adams continued to handle financial matters for the diamond grower, with “minimal oversight” from the board of directors, the U.S. Attorney’s Office said.

According to the indictment, Adams opened multiple bank accounts between 2006 and 2009 that were not authorized by Apollo and to which only he had access. He also directed the account statements to his personal address.

He told investors that they could purchase shares in Apollo by making their checks payable to the accounts he controlled, promising that their money would be used to buy more diamond growing equipment and to fund research and development. Instead, the U.S. Attorney’s Office alleges, he embezzled funds, diverting money for his own personal use and depositing some in his law firm’s bank account.

By 2010, Apollo was teetering on the brink of collapse due in part to Adams’ fraud.

To prevent his theft from being discovered in bankruptcy litigation, he allegedly devised a scheme to appease shareholders by convincing them to shift their investment to a new lab-grown diamond company, Greenville, South Carolina-based Scio Diamond Technology Corp.

Scio was created by Adams and his former law partner, whom the indictment references as “M.M”--Michael Monahan.

According to the U.S. Attorney’s Office, Adams’ theft continued after he started Scio.

All told, he is alleged to have stolen more than $4 million over the years.

Adams, along with his father-in-law and Scio board member Theodorus Strous, were forced out of Scio in June 2014 via a campaign organized by disgruntled investors called “Save Scio.”

In a statement released following the indictment, Scio said its current board of directors and management team have been cooperating with the Department of Justice in its investigation as well as a separate one with the Securities and Exchange Commission.

The company said that Adams has had no involvement with Scio or the new board of directors since he was ousted in June 2014. Company records also indicate that Adams and Monahan have liquidated a majority of their personal interests in Scio.

“Given the downward pressure the sale of Adams’ and Monahan’s stock holdings have had on the market for the company’s stock, the company will be seeking all available remedies to preclude future sales of (their) shares,” Scio noted, adding that it is “hopeful” these proceedings will result in restitutions to the company.

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