There was a study done a while back that looked at what happens when fake contraband (rhino horn in this case) is mixed in with real ones. They found that killing of rhinos went up because people wanted the real horn. The goal of pushing out fakes was to decrease the demand and it ended up with the opposite effect.

I imagine that diamonds will be similar.

Until there comes a point where anyone can grow a diamond in their home, DeBeers is going to continue to exploit people.