Sotheby’s May Be Responsible for Losing $4 Million In Rare Yellow Diamonds, Judge Rules
A California federal judge ruled that Sotheby’s may be responsible for the loss of 45 yellow diamonds worth $4 million last week. The ruling overturned a lower court’s previous decision in favor of the auction house.
M&L Financial, Inc., a financial services firm, had sued Sotheby’s, claiming that the house was liable for losing the diamonds that the firm had consigned.
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The firm allegedly told the auction house that it was the sole owner of the jewels. On the consignment agreement, however, M&L was listed alongside Jadelle Jewelry and Diamonds, a Beverly Hills retailer that was reported to be the subject of a federal criminal investigation in 2020.
Jona Rechnitz, owner of Jadelle Jewelry and Diamonds in Beverly Hills and jeweler to celebrities like Kim Kardashian, owed M&L a substantial sum of money, the original suit said. As security for his debt, Rechnitz allegedly transferred ownership of the diamonds to M&L with the understanding that he could later repurchase them at a fixed rate.
According to court filings, Rechnitz is friends with with Sotheby’s head of jewelry Quig Bruning. Rechnitz proposed that M&L list the diamonds with the auction house. The diamonds were then taken by M&L to Sotheby’s in Los Angeles for consignment in April 2019.
Later that year, Sotheby’s released the diamonds to a man who was supposedly picking them up on Rechnitz’s behalf. Sotheby’s did not tell M&L, and the house did not provide the judge with written records of the release. M&L claimed it was not notified of this and sued Sotheby’s.
Due to the ambiguity between the consignment and spoken agreements, the judge “reverse[d] the judgment and remand for further proceedings regarding M&L’s breach of contract claim. We award costs to M&L.”
In a statement, Sotheby’s said, “Sotheby’s regards the allegations in the complaint as baseless and riddled with untruths and mischaracterizations. We will continue to vigorously defend this in court.”
M&L did not respond for comment.
Since their mysterious disappearance, the diamonds have not been recovered.
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