TEL AVIV, Israel, Feb. 9 (UPI) -- The diamond industry in Israel is collapsing after police investigated an illegal bank in a diamond district, a former trade association president said.
The illegal bank near the Ramat Gan Diamond Exchange was apparently involved in money laundering and tax evasion, Haaretz reported Thursday.
But the raid on the bank has triggered a rash of bounced checks that has forced several diamond companies to close.
"The sector has collapsed," said Moti Ganz, former president of the Diamond Manufacturers Association.
"The investigation has ruined the industry. We are in support of (authorities) investigating whoever they need to, but they should give the investigation priority and finish it," Ganz said.
Ganz said the importation of uncut diamonds has come to a halt. "And if there is no raw material now then in another three or four months there will not be any exports of polished diamonds."
Three firms have declared bankruptcy and a fourth, Imber Diamonds, said it was close to bankruptcy with debts of about $20 million. In the meantime, the fear of arrest and of frozen bank accounts has rippled through the sector, putting many deals on hold, Haaretz said.