1901 Indian Head Penny Confusion - Please Help!

My Fiancee found this penny, it's a bit green on the bottom of both sides but the Liberty can be read, and you can make the date out as 1901 on the front. The front is normal, if ont in the best condition. My confusion is the back. I'm not sure who did what to this poor penny, but I'm sure it's not right. Any ideas or help would be appreciated, I'm adding the best picture I could get of it here. In the tarnished part there seems to be a diamond between the lines of the "asterisk" symbol, and the entire symbol on the back has tiny circles that make it up. The picture isn't very good, and sadly I've searched everywhere and found no reference to anything. Was it cut to be used in jewelry maybe? Thanks for looking!