Auction house can be held responsible for millions of lost diamonds
A state appeals court in the United States has ruled that auction house Sotheby’s could be held liable for the disappearance of $4 million worth of fancy-colored yellow diamonds.
The lawsuit began in 2020 when M&L Financial, a financial services company, alleged that Sotheby’s wrongly gave a collection of diamonds to an anonymous person.
In April 2019, Jona Rechnitz, owner of Jadelle Jewelry and Diamonds of Beverly Hills, provided 45 fancy colored yellow diamonds to M&L Financial as security for a debt. Along with the exchange, Rechnitz and M&L Financial agreed that the diamonds would no longer be moved so that Rechnitz could retrieve them at a later date.
According to the filing, Rechnitz and a representative from M&L Financial met in April 2019 with Quig Bruning, senior vice president of Sotheby’s, and arranged to have the diamonds appraised in New York.
Bruning is alleged to have listed M&L Financial and Jadelle Jewelry as shippers for the valuation, although M&L Financial was the sole owner of the diamonds following the debt arrangement.
Later that year, a representative from M&L Financial contacted Sotheby’s to obtain the result of the valuation. The representative was informed that the diamonds had been given to an associate of Jadelle Jewelry.
M&L Financial says it has not been able to recover the diamonds since they were released by Sotheby’s.
In an earlier hearing, a lower court ruled that because Jadelle Jewelry was on the shippers’ list, Sotheby’s was correct in giving the diamonds to the associate.
On July 14, however, the California Court of Appeals disagreed with the decision and allowed M&L Financial to sue Sotheby’s for breach of contract.
According CNN Business, Jadelle Jewelry no longer has a website and cannot be reached by phone. Owner Rechnitz could not be reached for comment.
A Sotheby’s spokesperson said CNN the shipment was treated like any other.
“Sotheby’s considers the allegations contained in the complaint to be without merit and riddled with untruths and distortions,” the spokesperson said.
“The person who picked up the property was an authorized Jadelle Jewelry agent. Shippers routinely ask Sotheby’s to hand over to an agent and here, when picked up, the agent provided the necessary identification.”
“We will continue to vigorously defend this in court.”
The case is further complicated by claims by M&L Financial that Sotheby’s was recommended as the auction house due to a personal relationship between Rechnitz and Bruning. Sotheby’s denied that the two had any connection beyond a business relationship.
Rechnitz, the owner of Jadelle Jewelry, has a checkered history. Prior to launching Jadelle Jewelry, he was the founder of real estate firm JSR Capital and a former employee of Lev Leviev’s Africa Israel Investments firm.
Rechnitz pleaded guilty to wire fraud in 2016 in a case involving the alleged bribery of public and union officials. He was sentenced to five months in prison and an additional five months of house arrest by a New York court.
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