Major lab created diamond producer files for bankruptcy

Collapse: Major lab-created diamond producer files for bankruptcy

Jeweller Magazine Article

Posted October 17, 2023 | By Samuel Ord

Reposted October 17th

The second largest lab-created diamond producer in the US, M7D Corporation, has filed for bankruptcy in the US.
Based in Washington DC, the company is owned by private equity firm Huron Capital and trades as WD Lab Grown Diamonds.

M7D Corporation has filed for Chapter Seven bankruptcy, which enables the elimination of debt as the company goes out of business.

According to the filing in Delaware, the company has $US44.8 million ($AU70.9 million) in liabilities and possesses assets valued at $US3 million ($AU4.75 million).

WD Lab Grown Diamonds has been producing lab-created diamonds since 2008 using the chemical vapour deposition method.

The company generated $US33 million ($AU52.55 million) in revenue in 2022; however, it has been unable to overcome production competition from India and China.

Diamond industry analyst Paul Zimnisky told The Financial Times that the company’s collapse demonstrated that “it’s getting very difficult for anyone to compete with the Chinese and Indian producers”.

WD Lab Grown Diamonds named JC Jewels its authorised distribution partner in Australia and New Zealand in 2022.

Legal woes

“Fenix was looking forward to the Court of Appeals affirming Judge Rakoff’s detailed and crystal-clear opinions. We stand by our processes, our customers, and the integrity of our business.”
NAMAN PARIKH, FENIX DIAMONDS
Others have suggested that the issues faced by the lab-created diamond pioneer extend further than the cost of production.

In 2020, WD Lab Grown Diamonds sued six companies, alleging infringement on patents it had licensed from the Carnegie Institution of Washington.

While most companies settled, one defendant – Fenix Diamonds – fought the suit and denied using any of Carnegie’s technology. Fenix is a supplier of lab-created diamonds to Michael Hill International.

In 2021, US District Judge Jed Rakoff dismissed Carnegie’s claims and entered a summary judgment in favour of Fenix.

Carnegie issued an appeal; however, on 5 September, the Court of Appeals granted Carnegie’s request to withdraw their appeal.

Naman Parikh, managing director of Fenix Diamonds, told Jeweller: “From the outset, Fenix advised Carnegie that we would litigate this case to the end.

“Fenix was looking forward to the Court of Appeals affirming Judge Rakoff’s detailed and crystal-clear opinions. We stand by our processes, our customers, and the integrity of our business.”

WD Lab Grown Diamonds reportedly reached settlements with ALTR Inc., Pure Grown Diamonds, and IIa Technologies, while claims against Mahendra Brothers and RA Riam were withdrawn.

Rob Bates of JCK Online said that while these legal battles represented an opportunity for profit, they may harmed the company’s standing with the rest of the industry.

“The fact that the company didn’t even attempt a restructuring, and there’s no apparent purchaser of its assets, is a stark reflection of its pre-filing financial condition,” he said.

“The patent battle hurt WD with one of its main assets: its reputation.

“In the early days of lab-created diamonds, some considered their competitors either too murky or too controversial. The people at WD, by contrast, were generally well-liked. The lawsuits blew up a lot of goodwill.”

WD Lab Grown Diamonds’ most significant debtor is a private credit asset management firm named Tree Line Capital Partners, which is owed $US36 million ($AU56.97 million).