Investigators Search for Hedge-fund H.K. Diamonds

Date: Tuesday, May 16, 2006
Author: Thomson Dialog, NewsEdge

(Rapaport...South China Morning Post) Financial investigators are trying to locate a stash of 100 diamonds bought in Hong Kong using money linked to a high-profile hedge-fund scandal in Canada. The tangled web leading to the diamonds involves a Hong Kong diamond merchant, a Chinese woman with a Hong Kong identity card who made the purchase, and a Canadian hedge fund co-founder hiding in Israel. When the C$800 million Canadian hedge fund Portus Alternative Asset Management folded in 2005 following allegations that a co-founder misappropriated $95.4 million, it left 26,000 investors out of pocket. The race was on to trace and recover the embezzled cash before it disappeared forever. With all but $17.6 million recovered, investigators appointed to find the missing millions turned their attention to an $8.8 million diamond purchase conducted by Portus co-founder Boaz Manor in Hong Kong. KPMG was charged with winding up the defunct hedge fund. According to the company, Manor bought the diamonds in June via wire transfers from a Bermuda bank to diamond merchant MID (Hong Kong's) ABN Amro account. The diamonds, including a 22-carat gem, were picked up from a shop in Central by Manor's sister-in-law, Yu Jieying --a Hong Kong resident-- on four occasions last summer. A middleman, private banker Yitzhak Toiv, then picked up the diamonds from Yu's office, after which the trail goes dead. All attempts to find the diamonds have failed. The three people involved have all said they do not have the diamonds and do not know where they were. Under a Hong Kong High Court summons, Yu told KPMG that she acted on instructions from Manor's wife, Wendy Yu --her sister-- and had no idea what was in the packages. In testimony to courts in Israel --where Manor fled in 2005-- and in another interview with KPMG, Manor said Toiv still had the gems. Toiv said he returned the gems to Yu, who has denied receiving them.