Dubious diamond dealers offer discounts of up to 39.6 percent

The business model of Stig, based in Dubai and Vienna: Customers buy certified diamonds via so-called “Diamond Solution Plans”. The central promise: monthly “discount credits” of 2.2 to 3.3 percent on the purchase price of the diamonds. Calculated over the year, that would be a discount of 26.4 to 39.6 percent.

You can get in for as little as $100. But to get the biggest discount, you have to invest $100,000 in a four-carat car. Stig claims that it is not a financial product, but rather a purchase of a tangible asset. The discounts were achieved because middlemen were supposedly eliminated and purchases were made from mines. The stones are stored safely by Stig for the entire twelve month period. Buyers can then physically receive the stones, or they can be sold back.

System copied?

What sounds like an exclusive gemstone investment raises considerable questions upon closer inspection. The questionable business model is not new: Until recently, Vaduz-based TGI AG led by Austrian Helmut Kaltenegger offered gold with a 72 percent discount and a 36-month term. However, after the financial market supervisory authority in Liechtenstein and the German financial supervisory authority Bafin classified the TGI offer as a deposit business, Kaltenegger has to reverse its discount model.

Mario Steinrigl once worked for him; he was employed in sales at TGI’s predecessor company, GGMT. “He copied our system with diamonds. How they do that is a phenomenon for me,” Kaltenegger tells KURIER. “When it comes to diamonds, there is no liquidity. When it comes to gold, I have one price, no matter where I buy it, it’s always the same, and gold is regulated completely differently.”

Not suitable

Diamonds do not provide any return or interest and cannot be traded on a public exchange. The German consumer portal Finanztip judges: “Diamonds are not suitable as an investment for most private investors.”

Because with diamonds you need a lot of specialist knowledge. “Diamonds are only suitable to a limited extent as an investment. The increase in value only occurs after many years,” says the Viennese expert Gabriela Breisach to the KURIER. “If you want to achieve quick returns, you should not invest in diamonds. The amount of increase in value depends on the size, color, type of cut and quality of the diamond.”

A structured sales department

To boost business, the Stig diamonds are primarily advertised on Instagram. But live events are also held in hotels in Vienna to recruit new customers. Basically, it is a structured sales process in which buyers or team partners recruit other buyers. According to Stig’s contract terms, team partners not only receive commissions from their own sales, but also “a corresponding commission on the product sales of the referred team partner”.