By Michelle Graff
New York--The sale of A. Jaffe, one of the three U.S. companies owned by Nirav Modi, is off, at least for now.

Court filings show that Ian Winters, the attorney for A. Jaffe, Firestar Diamonds and Fantasy Inc., withdrew the sale motion May 19. The sale was withdrawn without prejudice, meaning it could be refiled at any time.

The withdrawal came less than a week after a federal bankruptcy judge put the brakes on Parag Diamonds’ $8 million purchase of A. Jaffe, saying he needed more information about A. Jaffe’s connection to Modi, the billionaire diamantaire wanted in India for allegedly cheating state-run Punjab National Bank out of nearly $2 billion.

Winters did not respond to requests for comment Tuesday, and a spokeswoman for A. Jaffe said the company has no comment on the court proceedings at this time.

The only individual connected to the A. Jaffe sale to offer comment was Parag Diamonds owner Parag Jain, who said Wednesday morning that his company, which does business as Paramount Gems, did not back out of the bid. Debtors’ counsel was unable to meet the obligations required by the bankruptcy court and that’s why the motion for the sale was withdrawn, he said, though he declined to elaborate further.

A. Jaffe, Firestar and Fantasy filed for Chapter 11 bankruptcy protection in New York on Feb. 26, shortly after news of Modi’s alleged fraud broke overseas and the Indian government began seizing his assets and shutting down his factories.

They have since worked to distance themselves from Modi and his allegedly fraudulent activities—A. Jaffe said in its first statement in the case that “its core team here in the United States want to assure partners and customers that A. Jaffe is not in any way involved with any of the alleged conduct that is the subject of the accusations”—all the while assuring customers that they are committed to them despite the loss of back office support and supply from overseas. 

All three companies were offered for sale in an auction held May 3 in New York. A. Jaffe was the only one to find a buyer while Firestar and Fantasy remained up for sale. 

On Friday, the day before the sale motion was withdrawn, Mihir Bhansali, who had once been the CEO of all three companies, resigned.

Then, on Monday, Fantasy Diamond Corp. filed a motion Monday asking the court to allow it to sever the license agreement that currently binds it to Firestar Diamond and, ultimately, Nirav Modi, citing the inability to find a buyer for the two companies and concerns about the long-term value of its intellectual property.

“Fantasy Diamond had been advised by the debtors that although debtors continue to attempt to market the Firestar/Fantasy assets, either in whole or as pieces, the fraudulent activity”—meaning Modi’s alleged defrauding of Punjab National Bank—“for which the examiner appointed in this case has been charged with investigating has effectively chilled, if not frozen, interest in the Firestar/Fantasy assets,” court papers state.
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Fantasy also noted Bhansali’s departure in its motion: “The debtors’ business operations appear to be in some distress currently as, on information and belief, Mr. Bhansali has resigned and key employees have left the debtors’ employ.”

A hearing on Fantasy’s motion is set for June 7.

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