This episode is based on a true story.
In 1871, cousins Philip Arnold (1829-1878) and John Stack (1820-1896) perpetrated what became known as the Diamond Hoax of 1872: they claimed they had discovered a diamond mine (in northwest Colorado). They bought industrial grade diamonds (used for drill bits) and took them to some businessmen. They received a $50,000 down payment to buy their claim (equal to about $980,000 in 2018). They spent $20,000 to buy more gems in order to "salt" their claim; Tiffany & Company jewelry appraisers valued the stones at $150,000. The cousins were paid $660,000 for their claim (nearly $13 million in 2018). Afterwards, Arnold returned to Kentucky and started a bank; Slack moved to New Mexico and became an undertaker.
The title refers to the expression "A diamond in the rough" which means someone who is basically good hearted, but lacking social graces and respect for the law.
This plot was used in two episodes of Death Valley Days (1952): A Killing in Diamonds (1955) and The Great Diamond Mines (1968).