Michel Elias Germani initially told police he and a staff member were threatened by two men at his eponymous jewellery store in the Queen Victoria Building earlier this year.
The 65-year-old said one of the men threatened the woman with a knife while the other man demanded access to a safe, shortly after 6.30pm on January 19.
Germani and his employee had their feet and hands bound before the two men fled the George Street store.
Investigators allege the robbery was a scam orchestrated by the award-winning jeweller in an attempt to defraud his insurance company of more than $2.8 million.
Detective Superintendent Joe Doueihi said a large amount of jewellery of a "sizeable dollar amount" was alleged to have been stolen.
"During that ordeal, the store owner and the female staff member were bound with cable ties - feet and hands - and left in the location," he told reporters on Tuesday.
The innocent female staff member, who was injured in the attack, was "absolutely traumatised" and had no knowledge of the elaborate hoax, Det Supt Doueihi said.
"She was threatened with violence and a knife (and) bound with cable ties on her feet and her hands ... she was under the belief that it was a genuine robbery."
Police thought there was "something that just didn't seem right" about the robbery and after looking into the case investigators concluded Germani had "orchestrated the entire event".
The jeweller was arrested on Monday after presenting to police.
He was charged with aggravated robbery and depriving a person of their liberty, attempting to dishonestly obtain a financial advantage by deception, publishing false or misleading material to obtain property, and participating in a criminal group and contributing to criminal activity.
Germani faced Downing Centre Local Court on Tuesday where he made no application for bail and remains behind bars to reappear in court for a bail review on Thursday.
Another two men have also been arrested over the robbery under Strike Force Ingestre.
A 37-year-old man was arrested last month and charged and remains before the courts, police said.
A 57-year-old man was later arrested in Homebush West on April 22 and charged with aggravated robbery and depriving a person of liberty, and participating in a criminal group and contributing to criminal activity.
He was refused bail and appeared at Parramatta Local Court on April 23 where he was ordered to next appear at Downing Centre Local Court on June 29.
Germani gained international recognition for designing jewellery for the Saudi royal family, Queen Noor of Jordan, the Duke and Duchess Of Wellington, Elizabeth Taylor, and Princess Diana, according to the Germani website.
The eminent jeweller was also awarded the prestigious Diamond De Beers Award and sponsored the Sale of the Century TV show from 1988 to 2001.
The store was also robbed in 2020, when three masked men smashed the store's glass displays.
"They brought the big laundry bag. It's like a huge bag," Germani told Nine News at the time.
