Cory Smith
Photo: Knox County Sheriff's Office
Photo: Knox County Sheriff's Office

Man sentenced to federal prison in million-dollar diamond fraud scheme

An Atlanta man has been sentenced to federal prison after prosecutors said he tried to defraud dealers and wholesalers of nearly $1.2 million in diamonds and other high-end jewelry.

Cory Smith, 32, of Atlanta, “repeatedly exploited the trust of diamond and jewelry dealers” nationwide and successfully obtained nearly $570,000 in merchandise, U.S. Attorney BJay Pak said Tuesday in a news release. 

The scheme, which began in November 2016 and ended in September 2018, took advantage of the jewelry industry’s use of “memo financing,” according to prosecutors.

Memo financing is a type of consignment arrangement where jewelry dealers borrow diamonds from a supplier and pay for them after selling them, Pak said. Jewelers return unsold items to the supplier. 

Smith contacted suppliers across the country and said he was affiliated with a well-known jewelry dealer, according to Pak. He would order diamonds and jewelry and ask for it to be sent to a legitimate jewelry store in Georgia. 

When he received the tracking information for the shipments, Smith would contact the shipper and have the packages rerouted to another location such as a residential address or a different jewelry store, Pak said. A “runner” would then pick up the shipment. 

Prosecutors said Smith made arrangements for his runners to travel from Atlanta to locations out of state to pick up packages. According to Pak, he facilitated pickups in North Carolina, Oklahoma, South Carolina, Tennessee and Virginia. 

Smith defrauded more than a dozen diamond wholesalers before he was arrested Sept. 19, 2018, prosecutors said.

Smith was convicted May 13 after he pleaded guilty to interstate transportation of stolen property. He was sentenced to seven years and eight months in prison, which will be followed by three years of supervised release. Smith was also ordered to pay more than $567,000 in restitution. 

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