UK Fraud Watchdog Ignored Whistleblower Warning Before £170m Diamond Collapse

The Serious Fraud Office (SFO) failed to investigate a £170m diamond investment scheme despite receiving a detailed whistleblower report nearly a year before its collapse, BBC Panorama has revealed. The warning, submitted in May 2022 by a former senior employee of luxury jewellery retailer Vashi, was closed within 24 hours without follow-up, allowing the alleged fraud to continue and new investors to lose substantial savings.

When Vashi Diamond Manufacturers Ltd eventually collapsed in April 2023, a stock of diamonds supposedly worth £157m—presented to investors as security for their investments—was sold for just £158,000. The company's founder, Vashi Dominguez, left the UK for Dubai on the day of liquidation and has not been heard from since.

Background and Context

Vashi Dominguez built a high-profile jewellery business with stores across the UK, including a flagship outlet in London's Covent Garden. The company marketed itself as offering bespoke high-end jewellery at affordable prices, while simultaneously soliciting investment through claims of substantial growth and valuable diamond inventory.

Financial documents obtained by investigators reveal stark discrepancies between what was presented to investors and the company's actual performance. Marketing materials claimed sales of £53.6m in 2020, while internal records showed actual sales of just £5.5m that year. Similar inflation continued through 2021, with promotional materials claiming monthly sales of approximately £8.5m while internal data showed annual sales remained at £5.5m.

Key Figures and Entities

John Ames, who joined Vashi as chief technology officer in July 2021, became the primary whistleblower after discovering the financial discrepancies. After raising concerns internally and being dismissed in January 2022, he submitted a detailed report to the SFO in May 2022, warning that the company was "defrauding their investors" and "misstating information on their statutory reporting."

The SFO, Britain's primary agency for investigating serious fraud, allegedly assessed Ames' report as genuine but closed it immediately without contacting him for additional information. Internal SFO documents obtained through a subject access request show the case was marked as referred to Action Fraud, the UK's national reporting centre for fraud, though Action Fraud confirmed to the BBC it never received such a referral.

The Insolvency Service, which has powers to investigate and disqualify company directors, also received Ames' warning in May 2022 but responded that it was "not appropriate to use the powers available to the Insolvency Service to investigate the company at this time." The agency only opened an investigation after Vashi's collapse the following year.

Legal and Financial Mechanisms

The alleged fraud operated through classic misrepresentation of financial performance and asset values. Investor funds were reportedly used to sustain operations rather than being secured by claimed diamond holdings. The company continued raising capital—including a £75m fundraising round—while presenting potentially falsified financial information to prospective investors.

Michael Moszynski, an advertising executive who invested tens of thousands of pounds in December 2022—seven months after the SFO received the whistleblower warning—told the BBC: "Had the SFO done their job, I wouldn't have lost my money. I was astonished to see the lack of any follow up."

The SFO defended its decision, stating: "When we don't progress a referral, we're not dismissing concerns about potential criminality. It simply means that it is assessed as not meeting the criteria for the SFO to investigate." The agency, which typically handles approximately 35 complex cases simultaneously, declined to provide details about its internal assessment process.

International Implications and Policy Response

The Vashi case highlights significant gaps in the UK's anti-fraud infrastructure, particularly regarding whistleblower protections and inter-agency coordination. Dominguez's departure to Dubai following the company's collapse also raises questions about international cooperation in financial crime investigations and asset recovery.

The Insolvency Service confirmed it has "shared findings with law enforcement partners" but noted that "irregularities... were unable to be clarified due to the principal director leaving the country." The case underscores ongoing challenges in holding perpetrators accountable when cross-border jurisdictions are involved.

This failure to act on credible intelligence comes amid broader concerns about the UK's approach to economic crime. Recent reports have suggested the country's anti-money laundering and fraud enforcement systems are under-resourced compared to the scale of criminal activity, with billions lost annually to fraud schemes.

Sources

This report draws on BBC Panorama investigation, whistleblower testimony from John Ames, internal SFO documents obtained through subject access request, correspondence with the Insolvency Service, and Companies House filings for Diamond Manufacturers Ltd (Vashi). Additional information comes from investor testimony and statements provided to the BBC between 2022 and 2024.