The deal was completed last Friday but San Jose has been returned its third-round pick in this June's NHL entry draft.
"It was all subject to him reporting," Sharks GM Doug Wilson told The Canadian Press on Friday. "That was one of the conditions of the deal.
"He didn't come so we don't give up the pick. You never know when you're dealing over there (in Russia) so that's why you put those conditions in there."
Korolyuk's agent Brian Lawton said his client simply changed his mind.
"Initially he was going to come," said Lawton. "He had a legal right in his Russian contract to come back. It really came down to a moral decision. He had signed a two-year contract over there."
Korolyuk, 31, is under contract with the Devils this season and is currently suspended by New Jersey. He has 40 points (15-25) in 41 games with Chekhov Vityaz, his third consecutive season in Russia.
"What I did is inquire with all the NHL clubs about 10 days ago as to whether anyone was interested in him, and Doug was," Devils GM Lou Lamoriello told CP on Friday. "We checked with the player and he said he wanted to come back.
"That's when the transaction took place. But it was a condition that he show up and report, and he didn't."
Korolyuk hasn't played in the NHL since 2003-04 when he put up 37 points (19-18) in 63 games with the Sharks. San Jose traded his rights to New Jersey last fall along with defenceman Jim Fahey in exchange for a first-round pick and the rights to suspended defenceman Vladimir Malakhov - a deal that gave the Devils much-needed relief under the salary cap.
Korolyuk, San Jose's sixth-round pick in the 1994 draft, has 142 points (62-80) in 296 NHL regular-season games - all with the Sharks.