Online retailer Enchanted Diamonds of New York City went bankrupt and liquidated in 2019; consumers accuse co-founder Joshua Niamehr of operating in bad faith.
Consumers and trade members are reeling after Enchanted Diamonds basically went dark and stopped answering their phones on June 7th.
My phone and inbox have been flooded with inquiries from people wondering if I was able to contact CEO Joshua Niamehr.
Spoiler Alert: Yes I did speak with Joshua from Enchanted Diamonds on Saturday, June 15th. One of those people created the post shown below on public forum where he clearly states that Enchanted Diamonds is a scam.
Enchanted Diamonds "Your
Fairytale Nightmare Starts Here"
The tag line for Enchanted Diamonds used to read "Your Fairytale Engagement Ring Starts Here" but it seems like the Fairytale has turned into a Nightmare for consumers and trade members alike.
Based on testimonials posted by consumers on the thread and articles in the NY Daily News and JCK Magazine, it appears that Enchanted Diamonds accepted cash/wire transfer payments and never shipped the diamonds or issue refunds.
Enchanted Diamonds CEO Blames Rare Carat for Their Demise:
Without knowing more about the situation, we can only imagine how Rare Carat could possibly be responsible for the situation at Enchanted Diamonds.
Rare Carat is an online search engine that compiles listing data from various online vendors who pay them to list their inventory and show it to you on a Pay Per Click (PPC) basis.
The following statement appeared in a Rapaport Diamond News release on June 24, 2019:
Perhaps the charges generated by the PPC business model started to add up faster than Enchanted Diamonds anticipated and it created financial issues for the company. Then again, if those clicks were creating sales, then you might think that the profits from those sales would more than pay for the clicks.
The problem with Enchanted Diamonds and many other websites selling diamonds is that their prices are so low that they might not make sufficient profits to stay afloat. That certainly appears to be the case with Enchanted Diamonds and this has raised concern about other sites operating in similar fashion.
I evaluated a diamond for a client yesterday from another online vendor who appeared to be making less than $35 on an eight thousand dollar sale. Based on 30+ years of experience as a diamond dealer, I can tell you that it's not a sustainable business practice and I'm hesitant to recommend anybody buy anything from that company because it may only be a matter of time before they meet the same fate as Enchanted Diamonds.
Enchanted Diamonds Files for Bankruptcy:
With each day that passes, it seems like more and more people are adding their names to a growing list of consumers who claim to be caught in the web of what is commonly being referred to as the Enchanted Diamonds Scam. Reports of the number of people currently affected range between 20 - 57 depending on the source.
Based on a brief conversation that I had with Joshua Niamehr via Skype on Saturday, June 15th, Enchanted Diamonds was "working on getting out of bankruptcy."
Five days later, Enchanted Diamonds which is owned and operated by the Online Diamonds International Corporation filed for bankruptcy protection on June 20, 2019.
Do the math and you'll see that Enchanted Diamonds allegedly received payments totaling almost a quarter of a million dollars from the people on this list for diamonds which have yet to be shipped. This list is not likely to be complete because it's from a few days ago and recent reports indicate that there might be more than 57 people involved.
According to the news article in JCK Magazine:
"Rare Carat chief executive officer Ajay Anand, whose website listed Enchanted as a retailer, says it’s helping Enchanted consumers get their money back—even if they didn’t reach the retailer though his site."
"The site has enlisted local lawyer Peter Cane—who represented a YouTuber in a case brought by Brilliant Earth—to represent any customers who say they didn’t get what they ordered. Rare Carat is paying Cane’s legal fees."
How Enchanted Diamonds Bankruptcy Affects Consumers:
The Online Diamonds International Corporation DBA Enchanted Diamonds filed for bankruptcy protection on June 20, 2019. Which means that it might be some time before the people entangled in this nightmare are able to get their money back. That is of course, if they are able to get it back at all.
One thing is for certain and that is that the company could have done a better job of keeping their customers apprised of the situation rather than acting like the proverbial ostrich with its head stuck in the sand.
Based on conversations I've had with various customers of Enchanted Diamonds affected by this situation it's the lack of communication that upset them the most initially, but now they just feel scammed.
Which makes sense because those people did not receive the diamonds they paid for and it seems like they've been robbed. Based on my conversation with Joshua Niamehr via Skype on June 15th, it seemed like he didn't want to make any promises that he might not be able to keep. While I can respect the good nature of that intention, it didn't do people any good to be kept in the dark.
Imagine Sending Thousands of Dollars into Cyber Space:
And Getting Ripped Off. The backlash which is brewing on social media right now is the kind of perfect storm that can take down the most profitable of companies. Which means that even if Enchanted Diamonds is able to raise the investment income necessary to pull out of their apparent nose dive, they might not be able to survive the social backlash created by going dark and not keeping their customers apprised of the situation.
Then Receiving This Email from the Company "that ripped you off":
That subject line. OUCH.
"4 Tools to Make Sure You Aren't Getting Ripped Off"
It's like rubbing salt in an open wound, but I'm relatively certain that the irony is not intentional. This email is most likely part of an email campaign which was written before the current situation developed at Enchanted Diamonds.
However, two days after it was sent out, the front page of Enchanted Diamonds was updated to indicate that they are not accepting orders at this time:
Well, that's good. At least nobody else will be able to initiate an order and add to the confusion.
In the meantime, we can only hope that Enchanted Diamonds and the Online Diamond International Corporation will do everything within their power to rectify the situation and make people whole again.
Is Joshua Niamehr Knowingly Writing Bad Checks?
One of my clients received a check on the 18th from Enchanted Diamonds via Fed Ex for a diamond which she purchased from them previously and sold back at a discount.
The check was returned by the bank on June 26th because the account was closed two days after it was issued.
Based on this fact, it would appear that Joshua Niamehr of Enchanted Diamonds issued the check and sent it to my client knowing full well that she would never be able to collect the funds.
At the same time, you have to ask yourself why he would issue a check under those conditions when doing so adds to the potential fraud charges being filed against him by other consumers.
Because according to Nolo Law knowingly writing a bad check prior to filing for bankruptcy constitutes Bankruptcy Fraud and Joshua Niamehr seems like too smart a guy to do something like that on purpose.
Seriously, why issue the check at all? Because doing so intentionally to toy with the emotions of another person seems incredibly cruel. Especially when the only mistake that person made was placing her faith in the hands of somebody like Joshua Niamehr of Enchanted Diamonds.
From our perspective, it's one thing for a company to file bankruptcy because they are experiencing financial problems. It's another matter entirely to screw with peoples lives and continually mislead them, so we hope that isn't what is happening here.
However, based on the evidence and testimony provided by consumers caught up in the Enchanted Diamonds Fiasco, it appears that Joshua Niamehr might have been collecting money from customers for diamonds that he never intended to send for the sole sake of accumulating funds prior to filing for bankruptcy protection.
Of course, we'll leave it for you to decide because each of us must reach our own conclusions with regards to this matter and ultimately it will be up for the courts to decide. I can only hope that the Bankruptcy Trustee in NYC sees the situation for what it appears to be.
To quote one of my mentors in the diamond business: "I sincerely hope that Joshua Niamehr gets everything he deserves from all of this."
Enchanted Diamonds versus Zoara Diamonds Closure 2019:
Zoara Diamonds was another online diamond discount broker which closed its doors on January 1st, 2019.
Both Enchanted Diamonds and Zoara were well known for being low-profit dealers who worked on very low margins. The difference between Enchanted Diamonds and Zoara is that the latter was backed by De Beers sightholder, the Dalumi Group.
Even with those kinds of deep pockets to back their play, it is apparent that the Zoara was unable to survive on the meager profit margins they were charging.
Unlike Enchanted Diamonds which continued to give the impression on their website of business as usual, Zoara immediately updated their front page to indicate that they were closed. They also indicated that "Zoara.com is closed and no longer accepting orders. All currently outstanding orders will be completed within the next few days and shipped out accordingly."
So their customers knew exactly what was going on. I'm certain that a few people might still have been worried, but the company made a clear effort to assure their customers that they would receive the diamond which they paid for. Perhaps this is why nobody seemed to freak out when Zoara closed its doors.
I admit that I had to chuckle when I read the first line of this article written by Rob Bates of JCK Magazine:
"Zoara is no-more-a."
And then the thought popped into my head that the Fantasy of Buying Enchanted Diamonds might have been nothing more than a fairytale. Which is based on their slogan: "The Fairytale Starts Here".
It seems more like a nightmare from my perspective, but that might change if Joshua is able to turn things around.
Filing for bankruptcy is not the same as going out of business.
We live in an era of corporate bail-outs and there's always the chance that he might strike a deal with investors or get bought out by a larger diamond company.
The truth of the matter is that we don't know all the details and can only speculate about what happened and what might happen with Enchanted Diamonds.
What Caused Enchanted Diamonds to Go Under?
Without having a clear answer to the question, it is natural for people to speculate and ask things like:
Did Enchanted Diamonds CEO Joshua Niamehr intentionally defraud customers of their money knowing that they wouldn't be able to fulfill their orders?
Why did the website continue to accept orders long after they stopped answering their telephone?
Did Enchanted Diamonds continue to accept orders and payment from people knowing that they wouldn't be able to fulfill the orders, or did they intend to honor their obligations and this entire fiasco is the result of a series of unfortunate events that snowballed out of control?
Will filing for bankruptcy protect Joshua Niamehr and Enchanted Diamonds from the fraud charges and the civil action filed against them by Rare Carat on behalf of consumers?
How long will it take for people to get their money back from Enchanted Diamonds?
Rating Your Experience with Enchanted Diamonds:
It seems to me that the measure of a company isn’t whether or not they experience problems, but rather how they address those challenges when they occur.
If you’re familiar with my blog, then you might remember that my initial review of Enchanted Diamonds was not good.
As a matter of fact, I gave them an F- and provided a detailed list of the reasons why.
Which Joshua (and his partner at the time) took to heart and acted upon to improve their website. This prompted me to write another review that reflected the improvements they had made because our reviews are a reflection of our current experience and events.
The current state of affairs involving Enchanted Diamonds is clearly disturbing and it seems clear that they have failed to fulfill their obligations to everybody involved.
However, something tells me that we haven't seen the end of Joshua Niamehr and the fabled Enchanted Diamonds. He just might pull a rabbit out of the hat and surprise us all.
Stranger things have happened and hindsight is 20/20. We won't know the truth behind what happened until all the details of this story have been dragged out into the light of day.
But the apparent failure of Enchanted Diamonds and the business model that they operated by raises an important question.
Is the Online Low-profit Business Model Sustainable?
Or you might be wondering whether you should even buy a diamond online at all given the apparent risks.
Look. The reality is that diamond dealers and traditional brick and mortar jewelry stores close or go bankrupt all the time. Anybody who is in business today will tell you that it's a tough market and competition is fierce.
But there is one thing that both Enchanted Diamonds and Zoara had in common. Which is that both companies operated from the standpoint of offering very low prices in the hope that they could build a thriving business out of selling diamonds online for little to not profit.
It's a popular business principle built on the theory that other companies have been built on the idea of being the low-cost leader for other consumer products.
The problem is that you have to have millions of dollars in venture capital sitting around for you to dip into while you build up volume and establish yourself as the low-price leader for whatever you're selling.
Or, you have to hope that you're able to create enough traffic real fast to generate the type of cash flow necessary to float the boat until you succeed.
Either way, any business which fails to make sufficient profits on the products they sell is not likely to remain in business for long.
Which means you may be rolling the dice (with your money) if you buy from a discount diamond dealer who is not making enough profit to be sustainable.
Are Discount Diamond Dealers like ABC and XYZ Reputable?
In light of the current situation involving Enchanted Diamonds, one of my clients who was considering buying a diamond from them wrote me to ask whether he should buy the same diamond from two other dealers who were listing the same diamond.
Here's what he wrote:
"Do you think that I should buy the diamond from ABC or XYZ? Are they any more reputable?"
Obviously, I'm editing the names of the companies, but the truth is that I don't know what to tell him because I'm not privy to the inner workings and financial statements of these companies.
As a diamond buyer with 30+ years of experience, I can help you search for diamonds online and walk you through the details provided on the diamond grading reports and any images which might be available. However, I can't tell you who to buy from or guarantee that they are a reputable company with a solid financial future.
Only you can decide whether or not you should purchase anything from anybody. Which is why you should always conduct your own due diligence before buying anything of significant value. Read the reviews, both good and bad, and determine whether you feel the vendor is trustworthy or not.
"You should always perform due diligence before buying products or services from anyone via the Internet or offline."
Should You Buy from Virtual Diamond Dealers?
Regardless of their individual financial situations or reputation, each of the following internet dealers primarily sells virtual diamond inventory which is a reflection of the inventory listed with the multiple listing services that we use to trade diamonds globally:
These companies do not own the majority of diamonds listed as inventory on their websites. Which means that they are essentially competing with each other for your business by trying to offer the lowest price possible to generate cash flow and make enough profit to be sustainable.
This is a low-profit business model which might be good for you, but which might be bad for them in the longterm depending on whether they make enough profit
It's also a business model that might be bad for you in the near future if you happen to get caught up in something similar to what is going on with Enchanted Diamonds, but it's also important to realize that each of these companies is operating at different percentages of profit and each of them have different financial resources.
The only thing they actually have in common is that they offer virtual inventory rather than selling diamonds which they own and are sitting in their vaults.
Now. You can imagine being one of the people who sent money to Enchanted Diamonds and got caught up in the scam, having sent money and yet to receive the diamond you ordered and/or a refund with what appears to be little hope of legal recourse and work yourself up into a nice case of analysis paralysis... or you can:
Enchanted Diamonds Is the Exception Not the Rule:
The situation with Enchanted Diamonds and the people involved is the first of its kind as far as I can remember.
In my experience, all the companies selling diamonds online that I interact with do their very best to ensure their customers of the highest level of customer service.
There may be times when things don't go perfectly as planned:
But those are the sort of things that can go wrong with any business (online or offline) and they are also the kind of problems that companies try to prevent from happening and try to resolve quickly when they do.
Heck, I received an email from a lady the other day who indicated that her local jeweler store set the wrong diamond in her engagement ring and sold the diamond that she purchased to another customer.
She wanted to know whether the diamond they were offering as a replacement was comparable to the one she purchased. It's a can of worms and it's a sad turn of events, but it's not the end of the world and the jewelry store isn't leaving her holding the bag. They're doing the responsible thing and taking responsibility for their mistake.
The Majority of Diamond Dealers Are Reputable:
It's easy to lose perspective in the shadow cast upon the industry by the downfall of Enchanted Diamonds and view all diamond dealers in the same light. However, the fact of the matter is that most diamond dealers selling diamonds online are good, honest, hardworking people who will do everything possible to earn your business.
The problem is that this is exactly what we would have said about Joshua Niamehr and Enchanted Diamonds less than a few weeks ago, right?
And that's the rub. The reputation of everybody selling diamonds online is only as good as their last transaction or involvement with a customer.
Which is why we all try to do our best when working with every new customer and maintain good relationships with existing clients by striving to deliver the highest degree of customer service possible.
But in the end, we have to remember that it's up to us to conduct our own due diligence and decide whether the company we're doing business with is really reputable and operating from sound financial principles. Which also means that we have to expect them to make a reasonable profit in order to stay in business.
How to Protect Yourself When Buying a Diamond Online:
Look. It's a harsh reality, but we all know that there are no guarantees in life. You stand the same chance of being ripped off whether you buy a diamond online or from a local brick and mortar jewelry store.
There are more stories of jewelers switching diamonds out for synthetics or simulants than there are for people being ripped off buying online.
Some of these stories are probably nothing more than urban legends and some of them might have merit.
Some people are good and some people are bad and sometimes good people get caught up in bad situations... This is most likely what happened with Enchanted Diamonds.
I would like to think that Joshua Niehmr didn't set out to rip anybody off, but rather just got caught up in the momentum of a series of unfortunate events instead of setting out to be the next Bernie Madoff.
Which might not make the situation any less painful for the people involved, but until recently, I thought of Joshua as one of the good guys. In fact, based on every conversation that I've ever had with him, he seemed like the type of guy who wanted to do the right thing.
Which is why I'm so rattled by the events of the past few weeks.
Thinking positive, I sincerely hope that Joshua is able to turn this situation around and find a way to do the right thing and repay everybody caught up in the bankruptcy, both consumers and trade members alike.
But at the end of the day, we have to move forward and minimize the damage created in the wake of the Enchanted Diamonds Scam (as they're calling it on Pricescope).
And hopefully, we can learn something from the situation so that other people don't experience the same type of thing in the future. One of those things is likely to be the lesson that extremely low-profits is not a sustainable business practice in the diamond industry.
Using Your Credit Card Provides Full Protection:
Look. It's no secret that the best way to protect yourself when buying anything is to use your credit card.
Anybody who purchased a diamond recently from Enchanted Diamonds using their credit card and didn't receive it can escape the situation by calling their credit card company and disputing the charge.
The odds are that your bank will cancel the charge almost immediately.
In addition, many credit card companies offer additional protection for high-ticket items purchased via their credit cards. Which is why it might be worth it for you to use your credit card when buying diamonds and other luxury items online.
Of course, you can usually save 2-3% if you pay by cash/wire transfer because the diamond dealer isn't having to pay the credit card merchant processing fee.
Is It Safe to Buy a Diamond Online via Wire Transfer?
Hardly a day goes by without somebody asking me whether it's safe to buy a diamond online by wire transfer. Up until the events of last week, I had never heard of anybody experiencing a problem with any of the more well known companies, so I was able to say no problem.
Now, I'm not so sure.
I mean, there are a few companies that I personally would not hesitate to wire transfer money to:
Blue Nile is owned and operated by a mega-size venture capital firm and I've known the people behind Brian Gavin and High Performance Diamonds for almost 30 years. I've got the principles of those companies on speed dial and can reach them at a moments notice. If they tried to ghost me, I'd just show up at their house.
Same thing with James Allen which was purchased by Signet Jewelers in August of 2017 for 328 Million in Cash.
I trust in these companies to provide my clients with high quality diamonds at a fair price. Which is not to say that they're 100% infallible and that they couldn't go under, but that I think it's highly unlikely.
Most importantly, I think that they would handle things differently in the event of an unforeseen tragedy like we've seen this week.
But can I guarantee that none of these companies or the people behind them will never screw up and experience the kind of financial disruption that caused the demise of Enchanted Diamonds? Absolutely not, I can only rely on past experience and trust in the idea that the majority of people are good, but know that sometimes bad things still happen.
Were You Harmed by Enchanted Diamonds?
Let us know if you are one of the people affected by the Enchanted Diamonds fiasco by leaving a comment below.
Or leave a comment below if you would just like to say something about how things were handled or have an idea of how they could have been handled better.
As tragic as the events of the past few weeks have been, we have to focus on what we can learn from it and strive to prevent such things from happening in the future.