The Scott Rothstein diamond saga just got more mysterious.
A loose 8.91-carat diamond valued at $1 million retail and purchased by Rothstein with money from his Ponzi scheme has been reported stolen by a New York wholesaler.
Attorney Patrick Scott, a GrayRobinson partner in New York, broke the news to U.S. Bankruptcy Judge Raymond B. Ray on Friday. Scott represents SPD Group Inc., parent of J.R. Dunn Jewelers in Fort Lauderdale, which sold Rothstein the jewel as well as a number of other diamonds.
Rothstein, a disbarred Fort Lauderdale attorney, is serving a 50-year prison sentence for masterminding a $1.2 billion fraud from his law office.
J.R. Dunn was sued by the court-appointed bankruptcy trustee for Rothstein’s defunct law firm. Ray on Friday approved the jeweler’s $300,000 settlement, which includes turning over 33 percent of the proceeds from any recovered Rothstein diamonds.
J.R. Dunn traced the 8.91-carat round diamond to New York wholesaler J.B. International LLC after tracking it through several states, according to court documents. Scott has not revealed who started the diamond transactions earlier this year but said J.B. International in New York was advertising it as a stone that could sell for $1 million.
Scott said J.B. International owner Jonathan Birnbach lent the diamond on speculation, and the recipient showed it to someone who switched the diamond with a cubic zirconia — a piece of glass cut to look like the diamond.
Scott said it appears the person who was shown the diamond palmed it and made the switch.
Birnbach’s attorney, Grace Robson of Fort Lauderdale law firm Markowitz, Ringel, Trusty + Hartog, did not return a phone message by deadline.
A second amended complaint to be filed against the jewelry wholesalers and dealers who ended up with Rothstein’s missing diamonds will be filed in the next few weeks, Scott said. The complaint will allege people who handled the diamonds did not follow the law set up to prevent diamonds from being used for money laundering.
Rothstein has said he used diamonds and other precious gems regularly for money laundering. When his Ponzi scheme collapsed in October 2009, Rothstein and his wife, Kim, were ordered by the federal government to turn over all jewelry.
Kim Rothstein has been charged, along with four others, with hiding jewelry, including a 12-carat yellow diamond ring, from federal agents collecting Rothstein’s fraud profits.
Meanwhile, J.R. Dunn has been trying to track down at least three other loose diamonds that were never recovered, including the 8.91-carat stone.