The ongoing saga of Diamond Comic Distributors’ bankruptcy took another dramatic turn this week, as legal filings, failed deals, and mounting accusations sent shockwaves through the comics and gaming industries.
Late Monday night, April 28, 2025, the U.S. Bankruptcy Court in Baltimore saw a major development when Matthew W. Cheney, Acting United States Trustee, filed a motion to convert Diamond’s Chapter 11 bankruptcy to a Chapter 7 liquidation or dismiss the case entirely. The reason: Diamond has failed to file any of the required Monthly Operating Reports since the bankruptcy case began, with reports for January, February, and March now long overdue.
In other words, the court official overseeing Diamond’s bankruptcy filed an emergency request to either force the company to fully shut down or for the court cancel the bankruptcy case altogether. This is happening because Diamond apparently hasn’t turned in any of its required monthly financial updates since January. These reports are crucial because they show creditors how the company is spending money during bankruptcy. The court now has to decide by late May whether to liquidate Diamond’s assets (i.e. “sell everything off”) or remove bankruptcy protections entirely, unless Diamond fixes this paperwork problem quickly.
As the official filing put it, “Monthly operating reports ‘are much more than busy work imposed upon a Chapter 11 debtor… They are ‘the lifeblood’ of Chapter 11, enabling creditors to keep tabs on the debtor’s post-petition operations. Failure to file them… is a serious breach of the debtor’s fiduciary obligations and ‘undermines the Chapter 11 process.’” The court has scheduled a hearing for May 27, 2025, to decide whether to proceed with liquidation or dismissal, unless Diamond can resolve the issue or parties object in the next two weeks.
If the case is converted to Chapter 7, Diamond faces a “final death,” with assets sold off under less favorable terms and creditors likely to recover less. Dismissal would be even worse, stripping Diamond and its leadership of bankruptcy protections and exposing them to direct lawsuits from creditors. Founder Steve Geppi, who used other companies as collateral for a crucial loan, could see his remaining assets far more vulnerable to debt collection efforts.
Meanwhile, the process of selling Diamond’s assets has descended into chaos. After a months-long auction, Alliance Entertainment was initially declared the winning bidder for Diamond, Alliance Game Distributors, and related companies. But the deal quickly unraveled in a flurry of legal action and accusations. Alliance Entertainment, after being reinstated as the buyer following a previous dispute over Diamond’s attempt to switch to a lower bid, abruptly terminated its purchase agreement on April 24, 2025.
The reason for Alliance’s exit has now come to light in a blockbuster lawsuit filed late Monday. Alliance accused Diamond and its advisors of fraud and deception regarding Diamond’s relationship with Wizards of the Coast (WotC), the publisher of Magic: The Gathering. According to the complaint, “Defendants fraudulently misrepresented the status of the Debtors’ relationship with Wizards of the West Coast LLC (‘WOTC’), the Debtors’ largest vendor accounting for approximately 25% of the Debtors’ Alliance Gaming Business revenue, as part of an intentional scheme to induce Plaintiff to purchase the Debtors’ assets for tens of millions more than the true valuation of those assets.” The lawsuit alleges that Diamond knew as early as December 2024 that WotC would not renew its distribution agreement, which represented nearly $40 million of Alliance Game Distributors’ annual sales, but concealed this information from Alliance and other bidders. The truth only emerged after the sale was approved, when Alliance received an unredacted copy of the WotC agreement and learned of the imminent termination.
The complaint details how, after the revelation, Alliance tried to salvage the deal by offering WotC a fixed sum and minimum purchase commitments to extend the agreement, but WotC declined. Alliance then sought a reduction in the purchase price to reflect the loss of the WotC relationship, but Diamond refused to negotiate. With no resolution in sight, Alliance issued a Notice of Material Adverse Change and terminated the agreement. The lawsuit seeks the return of Alliance’s $8.5 million deposit, disgorgement of fees paid to Diamond’s advisors, and damages for breach of contract, fraud, and other claims. As the complaint states, “AENT also raised the fact that, after the Petition Date, the Debtors’ accounts payables had increased by approximately $16 million and inquired as to the Debtors’ plan for these increasing account payables and how the Debtors intended to pay them.” That meeting ended without an answer, further deepening Alliance’s concerns.
In the wake of Alliance’s exit, Diamond announced it is moving forward with the joint back-up bid from Canadian distributor Universal Distribution and NECA/WizKids parent Ad Populum. “Diamond Comic Distributors has pivoted to alternative, exceptionally well-known purchasers who are excited to partner with us,” said Chief Restructuring Officer Robert Gorin. “These companies have strong balance sheets and, importantly, unmatched presence and experience in our core industries. We are finalizing purchase agreements with these third parties and expect to announce the identities of these purchasers and seek court approval very shortly to complete the sale transactions”.
As the bankruptcy court prepares to decide Diamond’s fate, the company’s future hangs in the balance amid mounting legal battles, missing financial reports, and the loss of a major vendor. The company has approximately four weeks to get their affairs in order. With a hearing set for late May and creditors anxiously watching, the next chapter in the Diamond saga promises to be just as turbulent as the last. Will the comicbook industry ever be the same?
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English (US) · 