A cache of diamonds worth $4 million has gone missing. Now a judge says the buck can stop with Sotheby’s
In a tangled history of famous jewelers, political corruption and bankruptcy, Sotheby’s could end up with the $4 million bag of bright yellow diamonds, a California federal judge has ruled.
M&L Financial, Inc., a financial services company, sued Sotheby’s for the loss of the 45 gemstones left at the auction house for appraisal and possible shipment in April 2019. When M&L checked in at the end of this that year, Sotheby’s informed the company that a stranger had asked to pick up the diamonds, and he had complied.
Since then, the whereabouts of the jewels have remained unknown.
The diamonds were originally owned by Jadelle Jewelry and Diamonds, a Beverly Hills company owned by Jona Rechnitz, a former star witness in three federal corruption trials turned celebrity jeweler.
According to the lawsuit, Rechnitz owed M&L a substantial amount of money and transferred ownership of the stones to the company to help pay off its debt.
As part of the arrangement, Rechnitz would have the option of repurchasing the diamonds later. Then he made a suggestion: Sotheby’s should auction the stones. Rechnitz knew Quig Bruningthe head of the jewelry department, and could arrange an appraisal.
M&L maintains that he later learned that Bruning and Rechnitz were friends, and that the former flew in the latter’s private jet to Las Vegas and accepted expensive sports tickets as gifts.
At the time, the transaction seemed normal, until the time to sign the contract of expertise. On the only line provided for shippers, Bruning wrote both Jadelle Jewelry, Rechnitz’s company, and M&L, even though M&L verbally clarified that it was the sole owner of the stones.
Nevertheless, when a certain Levin Prado showed up at Sotheby’s asking for the diamonds on Rechnitz’s behalf, the auction house promptly turned them over. Sotheby’s did not keep a written record of the release of the stones, the suit claims.
With the diamonds lost, M&L sued the auction house. A lower court has granted a motion to dismiss from Sotheby’s, based on a California civil code that states that “where a deposit is made in the name of two or more persons”, it may be returned to either of them. parts.
But a federal judge has now ruled the code did not apply in this case because Sotheby’s knew the diamonds belonged only to M&L. Its new decisionwhich overturns the earlier decision, allows M&L to continue its breach of contract action against the auction house.
“Sotheby’s considers the allegations in the complaint to be baseless and riddled with untruths and distortions,” an auction house employee said. ART news. “We will continue to vigorously defend this in court.”
Rechnitz, it turns out, is something of a troubled figure.
He started Jadelle in 2018 through his personal relationships with celebrities such as Kim Kardashian, NBA stars Shaquille O’Neal and Scottie Pippen, and boxer Floyd Mayweather, Jr. (with whom Rechnitz is co-accused in a business unrelated to the profits of his fight against Logan Paul).
But before posing as a jeweler to the stars, Rechnitz owned a real estate company and was a major donor to Bill De Blasio. He has been the subject of federal investigations into corruption in the mayor’s fundraising activities.
In three trials, Rechnitz was a witness for the government. On the stand, he said his money bought access to the mayor. (In response, De Blasio called Rechnitz “a liar and a criminal. »
In 2019, Rechnitz pleaded guilty to fraud for bribing New York City officials on behalf of a hedge fund. Federal prosecutors asked for a reduced sentence because of his cooperation, and a judge sentenced him five months’ house arrest and imprisonment.
Shortly after sentencing, Victor Franco Noval, an investor in Jadelle, slapped Rechnitz with a lawsuit, claiming he was never repaid for a $2.8 million loan to the company. The jeweler initially pledged $7 million in diamonds as collateral, but when Rechnitz wrote a check and got them back, he bounced back, according to the complaint.
Novel’s attorney told the New York Post that Recnitz was running a $15 million scheme.
And those aren’t even Rechnitz’s only legal disputes related to her jewelry business. MJS Diamond Company sued Rechnitz in March, alleging he ordered $6.3 million worth of jewelry he never paid for, reports Law360. The lawsuit says the theft was part of a larger eight-figure fraud scheme in which Jadelle targeted jewelers on the east and west coasts.
Jadelle faced bankruptcy proceedings in 2020, but the case was later dismissed.
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