The theft, reported in local newspaper Nice Matin, came to light after the arrest of one of the main suspects by police in Paris. The 39-year-old man is being questioned over "conspiracy to defraud."
While the man is being held in jail, the whereabouts of the stolen ruby remains a mystery.
The trap was first laid when the jeweller was contacted in the spring by a man claiming to act as an intermediary for a wealthy Saudi prince.
The intermediary, who went by the name of Stion Naïm, initially tried to buy a diamond for €40,000.
According to a source quoted by the newspaper, "a cheque made out in shekels, the currency of Israel, was given to the jeweller" with the offer that the cheque could be cashed before the diamond was collected. This was to "give some confidence to the victim," according to the source.
The original sale of the diamond didn't go ahead, but terms were agreed for a second sale, of the valuable ruby.
The sale of the ruby was made with a cheque from BNP Paribas for €1 million. The jeweller described how he went to Paris to collect the payment.
"Stion Naïm met me in a small apartment on the top floor of a block in the rue Barbette in the 3rd arrondissement," he said. "The place was modest but he showed me a copy of the passport of the prince for whom he was working."
Once the ruby had been handed over, the cheque turned out to be from a stolen cheque book.
"I was a bit naive," he said. "This whole business has really destroyed me. We have been diamond-cutters for four generations in my family. The police have explained to me that I've been at least the twentieth victim of this gang of crooks."