Former Kimberley Diamonds executive chairman Alexandre Alexander has been arrested and charged with misleading the market.
Following an investigation by the Australian Securities and Investments Commission, Alexander was arrested at the Sydney Airport early this morning by federal police.
Four charges were laid against the Russian-born businessman in court this morning in relation to false and misleading statements made to the ASX between October 2013 and March 2014.
Alexander has been granted bail under strict travel restrictions, and has surrendered his passport to ASIC.
The matter has been adjourned until 10 November 2015, and will be prosecuted by the Commonwealth Director of Public Prosecutions.
It had been alleged that Alexander authorised statements, relating to Kimberley Diamonds’ future earnings forecasts, that failed to disclose that the company would receive a 30 per cent increase in price for rare yellow diamonds produced at the Ellendale Diamond Mine.
Each charge carries a maximum penalty of five years jail and/or a $34,000 fine.
ASIC said that up to May 2014 Kimberley Diamonds had been in negotiations with Tiffany and Co to increase the price of yellow Ellendale diamonds.
On 12 May 2014 the company announced that negotiations with Tiffany had failed, and revised their earnings forecast for the last quarter of the 2014 financial year from $7.5 million down to $1.5 million.
This resulted in a dramatic fall of 41.5 per cent of their share price, from $1.16 on 11 April, down to 17.5 cents by 30 May.
Kimberley Diamonds pulled out of the Ellendale Mine in July this year, closing it down with voluntary administration, to focus on the Lerala mine in Botswana.
The company left behind a legacy of disgruntled former employees, late royalty payments and outstanding rehabilitation costs.
At the time of the Ellendale closure Kimberley Diamonds owed the West Australian government $750,000 on their March quarter royalty payments.
On four separate occasions Kimberley Diamonds was faced with forfeiture action for failure to pay rental on the Ellendale tenement, and was fined $3087 on only one occasion.
In 2013 Kimberley Diamonds received a refund of $12 million from the Mining Rehabilitation Fund (MRF), however it is now expected that the $30 million cost of rehabilitating the Ellendale site will be shifted onto the MRF.
Ellendale was the world’s leading source of rare yellow diamonds, producing almost half of the world’s supply.