As a large-scale diamond smuggling and grading manipulation case unfolded in Vietnam, the global diamond certification system has plunged into a crisis of trust.
Consumers cannot tell diamond color, clarity, or inclusion grades with the naked eye, so they buy jewelry trusting international grading reports such as those from the U.S. authority GIA. But that trust has collapsed as smuggling rings erased laser inscriptions engraved on diamonds and attached inflated grading reports at will. There are concerns that the already shaken global jewelry market, hit by the surge of lab-grown (laboratory-synthesized) diamonds, now faces added anxiety that "even grading reports can't be taken at face value."
On the 2nd (local time), Bloomberg reported that Vietnamese investigators, having found indications that more than 30,000 diamonds worth 1.5 trillion dong (about $57 million, about 82 billion won) were smuggled over the past two years, are expanding their probe. The smuggling case is believed to be the largest ever in Vietnam.
The smuggling ring bought diamonds in India, routed them through Hong Kong, and brought them in hidden inside travel bags, shoes, and clothing. According to Vietnamese police, they erased the GIA certification laser inscription engraved on the diamond surface, then engraved a new inscription themselves and issued grading reports that overstated quality, selling the stones at far higher prices than purchase cost. How widely the diamonds in question spread in the market is still currently investigating. Local Vietnamese media reported that as the police probe widened, dozens of jewelry stores across the country, including in the capital Ho Chi Minh City, have closed.
Diamond transactions are, in effect, transactions of grading reports. Ordinary consumers cannot discern with the eye a diamond's weight (carats), color, clarity, or cut grade. So international grading authorities such as GIA examine the stone and issue a report assigning grades. In turn, grading institutions engrave a unique number on the diamond's girdle in a laser inscription thinner than a human hair that matches the report. If the number on the stone matches the paper report, the diamond is treated as authentic.
But this scandal has severed the link that connected the number on the stone to the paper report. In the past, criminal groups laundered a diamond's identity by hacking GIA's electronic system or churning out fake GIA reports. This is the first known case where, instead of those methods, a large organized ring was caught physically removing genuine inscriptions and using a local grading agency to fabricate new numbers and new reports. Experts said it is "a method that is hard for ordinary consumers and even small jewelers to detect, since it goes beyond paper forgery to mobilize inscription equipment and grading agencies."
In Vietnam's jewelry market, the epicenter, a "diamond bank run" has erupted. Vietnamese consumers treat diamonds not as adornments but as assets akin to gold. The habit of preferring tangible assets took root after war, inflation, and a planned economy. Just as depositors rush to withdraw cash for fear a bank may collapse, consumers who no longer trust diamonds have been flocking to jewelers demanding buybacks. On Ho Chi Minh City's jewelry street, the country's hub for jewelry transactions, a line of sellers arrived carrying old receipts and grading reports instead of customers choosing new rings. Citing a manager at the local jeweler Tam Luxury Diamond, Bloomberg reported, "As many as 100 people a day come to resell their diamonds."
PNJ, the largest listed jeweler on Vietnam's stock market, explained that "the problematic diamonds did not enter the retail network," but roughly half of its market capitalization has evaporated. Vietnam's jewelry market commonly practices "buybacks," under which a jeweler repurchases items it sold later. Consumers, when buying a diamond, are effectively also buying a promise that they can resell it anytime. However, PNJ has decided to cap daily diamond buyback payouts to preserve cash on hand. It plans to have its current inventory evaluated by international grading agencies. Phan Quoc Cong, PNJ's chief executive officer (CEO), acknowledged of the situation, "A crisis phase has hit the entire jewelry industry."
At another major company, Saigon Jewelry (SJC), authorities detected indications that from 2022 to 2024 more than 3,400 low-quality diamonds (about 500 billion dong, about 27 billion won) flowed into its sales network. Vietnamese judicial authorities have arrested four more people on the related charges. As the situation snowballed, the Vietnamese government decided to conduct focused inspections throughout August of the origins and labeling practices in the jewelry and precious metals market.
In Vietnam's market, imported diamonds worth $122 million (about 176 billion won) circulated in just the first half of this year. But as trust in grading reports and buyback promises wavered together, even secondhand prices collapsed. Huynh Trung Khan, vice chairman of the Vietnam Gold Trading Association, said, "To strengthen oversight and establish greater transparency and accountability in the market, we need an independent jewelry grading body."
The global jewelry industry is also expected to take a significant hit from Vietnam's diamond scandal. Lab-grown diamonds made in laboratories have become so precise that even experts find it hard to distinguish them from natural stones with the naked eye. Lab-grown diamond output is surging, centered on China, the top producer. While it is unconfirmed whether synthetic diamonds were mixed into this case, the incident shows that even the final safeguards—inscriptions and grading reports—that distinguished real from fake can be manipulated.
Kenneth Scarratt, vice president of the World Jewellery Confederation, told Bloomberg, "There is no way for an ordinary jeweler to separate the two by sight alone," adding, "If diamonds are being smuggled into Vietnam, it is highly likely that other gemstones such as rubies, sapphires, and emeralds are also being smuggled, regardless of scale."