The downfall of Folli Follie

Folli Follie faces the threat of closure following the revelation of a hole of $290 million in the luxury jewelry company's cash reserves last year and $1 billion in Asia sales. These discrepancies are even greater than the most pessimistic estimates, including those by hedge fund QCM, which brought the case to light last May.

This was the outcome of the preliminary report by Alvarez & Marsal that collected the data from Folli Follie's activity in Asia. The report led to the departure of the company's founders and leading executives Ekaterini and Dimitris Koutsolioutsos late on Tuesday.

Invited to probe the troubled enterprise, Alvarez & Marsal also identified losses instead of profits, cash reserves that were far below those declared, smaller requirements than those announced in the group's financial reports and double the obligations.

Given that key...