The Fate Remains Mysterious: an update on Diamond’s bankruptcy

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Brigid Alverson | May 2, 2025

It’s been another dramatic week in the ongoing saga of the Diamond bankruptcy, with the original purchaser, Alliance Entertainment, dropping its offer and suing Diamond alleging, among other things, fraud and breach of contract, and Diamond making a quick pivot to sell to the backup bidders.

The bottom line: Diamond will be sold to two bidders, the Canadian distributor Universal Distribution and Ad Populum, the parent company of collectible maker NECA and its subsidiary, WizKids. Universal will acquire the assets of Diamond’s Alliance Game Distributors, and Ad Populum will acquire Diamond Comic Distributors, Diamond Book Distributors, Diamond Select Toys & Collectibles, Collectible Grading Authority, “and other related assets.” Diamond UK, which was not part of the bankruptcy case, will remain separate.

If this sounds familiar, it’s because this is exactly the deal Diamond tried to push through earlier this month, when it declared that Alliance Entertainment, which had submitted the highest bid at the bankruptcy auction, wasn’t really the winning bidder and they were going to go with the Universal/Ad Populum bid, even though it was apparently lower. Alliance moved to stop that, Diamond backed down, and it looked like all systems were go for Alliance to purchase the company, with the sale scheduled to close on April 25.

It was not to be. Alliance Entertainment terminated the purchase agreement on April 24 after learning that Diamond’s Alliance Game Distributors had lost its contract with Magic: The Gathering and Dungeons & Dragons parent company Wizards of the Coast (WotC). Losing that contract would reduce Alliance Game Distributors’ business by about 25%. After trying and failing to renegotiate the purchase, Alliance Entertainment dropped its bid.

The WotC Whoopsie

Alliance Entertainment is suing Diamond as well as investment bank Raymond James, restructuring consultants Getzler, Henrich & Associates LLC, Chief Restructuring Officer Robert Gorin, and Charlie Tyson and Dan Hirsch, co-CEOs of Alliance Game Distributors, Diamond’s game distribution arm. Their complaint accuses them of hiding the loss of WotC until late in the proceedings.

(An important caveat: The following information is drawn from Alliance’s complaint. Diamond hasn’t filed an answer yet.)

According to the complaint filed by Alliance Entertainment, WotC told Diamond in December 2024 that they would not renew their distribution contract after it expired on December 31, 2024. Diamond negotiated a 90-day extension but did not reveal this information to Alliance and the other bidders until April 12, after the court had approved the sale of Diamond to Alliance.

How did Diamond conceal this critical information? According to Alliance, before the bid deadline, Diamond claimed all their relationships with key vendors were in good standing but wouldn’t discuss WotC specifically and redacted the termination dates from the WotC contract that was included in the paperwork provided to them. Nonetheless, Alliance bid on the company, was named the winning bidder, and paid a total deposit of $8.5 million. After the auction, they tried to get more information but their representatives would not let them communicate directly with key vendors and continued to claim all relationships were “strong and stable.”

The story changed on April 12, when Diamond provided unredacted copies, showing the contract was about to expire. Five days later, on April 17, they revealed, “for the first time” Alliance says, that the contract would not be renewed. “Realizing the impact that this would have on employee morale and the ability of [Diamond] to continue operations, [Diamond] implored [Alliance] not to raise the issue on the daily ‘all-hands’ conference calls scheduled for 5:00 PM each day,” the complaint says.

According to the complaint, when Diamond broke the news to Alliance on April 17, “[Diamond] feigned outrage, calling the termination ‘shocking,’ ‘coming out of nowhere,’ and ‘a slap in the face’ given [Diamond’s] twenty-five year relationship with WOTC.” Their tune changed during a videoconference that included WotC representatives on April 21. In that conference, WotC said that they had decided to terminate the contract because their sales through Diamond were down by 8% over the last four years, while sales through their other distributors had gone up significantly, and that Diamond was well aware of the decision. “Importantly,” the complaint adds, “[Diamond] did not refute WOTC’s characterization on the video conference.”

Having gone this far, Alliance Entertainment tried to get WotC to re-up through December 2025, offering a fixed sum plus minimum purchase commitments, but WotC didn’t bite. Then they tried to renegotiate the purchase price with Diamond to reflect the loss of a major client, but Diamond wouldn’t budge. So they sent the notice of termination of the sale, and then filed a complaint accusing Diamond and its representatives of breach of contract, fraud, and related misdeeds. The suit asks for the return of Alliance’s $8.5 million deposit, as well as damages and attorney’s fees.

What a Week!

It was a head-snapping week for anyone trying to follow the case. Things kicked off on Monday, April 28, when the bankruptcy trustee filed a motion to convert the case from Chapter 11 bankruptcy to Chapter 7 (full liquidation) or dismiss it altogether. The reason: Diamond had not filed the required Monthly Operating Reports for January, February, or March. These reports allow creditors to follow Diamond’s operations after the bankruptcy filing, and the trustee said that failing to file them was a serious breach and cause for dismissal or conversion to Chapter 7. A hearing was set for May 27.

The news that Alliance had withdrawn from the purchase agreement broke on April 28, and on April 29, Diamond filed its motion to sell its assets to Universal and Ad Populum as well as motions to hold the hearing at 10:30 a.m. the next day.

Alliance objected, noting that Diamond filed its motion to sell to the backup bidders at 10:16 p.m. on April 29 and asked for the hearing to be held just 12 hours later, but the court granted the motion and the hearing was held as requested on April 30. Diamond sent out a press release that same day announcing the sale.

There are still a lot of loose ends to be tied up. The final sale prices will have to be calculated, the debtors paid as much as possible of what they are owed, and the bankers and lawyers paid as well. The fate of Diamond UK remains mysterious; back when the bankruptcy was first announced, there were reports that Universal was considering buying it, but it hasn’t been mentioned since.

One more thing: April 30, Graphic Policy posted an anonymous letter purporting to be from a former employee complaining of unprofessional behavior by managers, low pay for employees, and possibly dangerous conditions, and asking the new owners to address these.

All this is important because, at the end of the day, this is not Dickens’ fictional Jarndyce v. Jarndyce. This case involves real people – creditors, debtors, publishers, creators, retailers, and customers. The outcome will materially change the comics industry in ways that are difficult to predict, especially as it comes at a time of increasing unpredictability in the country as a whole. The comics industry is bigger than Diamond, but Diamond touches every aspect of it in one way or another, and at the end of the day, the outcome of this case will have a profound effect on the shape of the comics world as a whole.

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