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After he is acquitted of murder charges, the arch criminal Professor Moriarty vows to defeat his rival, Sherlock Holmes, by committing the crime of the century.  To accomplish his goal, Moriarty confronts Holmes with two diversions.  The first is a letter that he sends to Sir Ronald Ramsgate, guardian of the Crown Jewels and Constable of the Tower of London, proclaiming that the Star of Dehli emerald will never reach the Tower of London.

Moriarty's letter brings Sir Ronald to Holmes's apartment, and he asks the detective to be present when the jewel is delivered.  Holmes agrees to Sir Ronald's request, and immediately after he leaves, Ann Brandon, who has written Holmes for his advice about attending Lady Conynham's garden party, bursts into his apartment.  Ann brings Holmes a drawing that her brother Lloyd has just received, depicting an albatross with a knife piercing its breast.  Ann is distraught because this is the same drawing that her father received just before he was murdered.  Ann is followed by Jerrold Hunter, her fiancée and the family solicitor, who chides her for being melodramatic.  Holmes disagrees, however, and takes Anne's case.  Holmes then sends his assistant to watch Hunter, and Watson reports that he has seen the attorney with Moriarty.

When Brandon is murdered and Hunter is found standing over the body, Inspector Bristol of Scotland Yard accuses Hunter of clubbing Brandon to death.  Holmes informs the inspector that although Brandon was beaten, the real cause of his death was strangulation.  Holmes then agrees to help Bristol solve the case in return for freeing Hunter.

Soon after, Sir Ronald visits Holmes and is upset to find the detective distracted by Brandon's murder.  Nevertheless, Holmes agrees to be at the Tower of London for the delivery of the emerald at ten the next evening.  Ann then receives a death threat for the next day, the evening of Lady Conynham's party and the delivery date of the emerald.  Holmes delegates Watson to guard the jewel while he goes to the party to watch Ann.

That night, Moriarty shaves off his beard in anticipation of defeating his rival, Holmes.  Meanwhile, at the Tower of London, Sir Ronald is furious at Holmes's absence when a police sergeant and his men arrive to protect the jewels.  When the emerald is delivered, Sir Ronald unlocks the case containing the Crown Jewels and at that moment, the lights go off.  In the ensuing chaos, the police disappear with the stone, but in the confusion, drop the emerald and Sir Ronald returns it to the case with the rest of the jewels, then leaves.  Moriarty, disguised as the sergeant, then emerges from the shadows and steals the Crown Jewels.

Meanwhile, at the party, Ann anxiously awaits the passing of midnight and her death sentence.  When Hunter comes to visit, he frightens Ann, who runs into the night.  Hunter is then struck unconscious by a man wielding a bola, the instrument that strangled Brandon.  After missing Ann with the bola, the man is captured by Holmes and confesses that Moriarty hired him.  Realizing that the death threats were a trick to distract him, Holmes rushes to Moriarty's apartment, where he finds a guidebook of the Tower of London and deduces that Moriarty is planning to steal the Crown Jewels.  Holmes rushes to the tower, where he engages Moriarty in mortal combat, causing the criminal to fall from a turret to his death.  With the threat of danger ended, Ann marries Hunter, and Holmes explains to Watson that Moriarty engaged Hunter in a lawsuit to throw them off the track.