​Lugano Holdings Inc., an operator of high-end jewelry boutiques owned by Compass Diversified, has filed for bankruptcy months after it accused its former chief executive of stealing millions of dollars from the business and misrepresenting investment deals with high net worth clients.

The retailer sought court protection Sunday in Delaware saying it has an offer to sell the business to Enhanced Retail Funding, a deal that must be approved by a bankruptcy judge and is subject to better offers at a Chapter 11 auction. Lugano listed at least $100 million in assets and more than $500 million in liabilities on its Chapter 11 petition. 

The bankruptcy filing comes months after the departure of former Lugano Chief Executive Officer Mordechai Haim Ferder, who established the business in 2004. Following an internal investigation by Compass, Lugano filed a civil lawsuit in June accusing Ferder of forging invoices and sale documents.

“With Lugano’s decision in place, there is now a defined and orderly process to bring the Lugano matter toward resolution,” Compass Chief Executive Officer Elias Sabo said in a statement.

Compass acquired a majority interest in the business in 2021 at a $256 million valuation, according to court papers.

The complaint alleges Ferder concealed the nature of transactions he entered into with high net worth individuals related to financing the purchase of diamonds that investors were told would be sold for a higher price, according to the lawsuit. Investors were told they’d get a stake in a diamond and would be repaid at a “substantially above market, interest rate,” the lawsuit alleged.

Ferder is accused of disguising these transactions as ordinary sales and recording the incoming funds as revenue rather than liabilities, according to the complaint. As a result, he misled Lugano’s stakeholders and auditors about the company’s actual performance and valuation, the lawsuit alleged.

Ferder resigned as chief executive officer in May and has not formally responded in court to the June lawsuit. He couldn’t be reached for comment Monday. Lugano said in the June lawsuit that Ferder was residing in Tel Aviv “and appears to be in the process of moving his assets out of the United States and to Israel.”

Lugano Chief Restructuring Officer J. Michael Issa said in a Sunday court filing that other lawsuits have been filed against the company and Ferder since the summer.

Ferder and his affiliated entities retained about 40% of the business following the Compass acquisition, a deal that fueled the opening of additional boutiques and a private social club for its clients called Lugano Privé, Issa said. 

The company had believed it generated $470 million in revenue and $180 million in operating income in 2024 but now “those amounts are being revised to reflect actual revenues and operating income at substantially lower levels,” he said.

Compass has agreed to provide Lugano with $12 million in Chapter 11 financing to fund the bankruptcy and related sale process. Lugano said its stores remain open and are operating normally.

The case is Lugano Diamonds & Jewelry Inc., number 25-12055, in the US Bankruptcy Court for the District of Delaware.