Once they were allies, but it looks like it’s on between Diamond Comic Distributors and Sparkle Pop. We broke the news that Diamond was throwing Sparkle Pop under the bus by revealing that Sparkle Pop was selling consignment goods in violation of a hell of a lot. The news broke because of the Ad Hoc Committee of Consignors trying to figure out who the hell was selling the inventory and more. Now, a motion has dropped in court by Diamond going after Sparkle Pop for numerous violations. This was one of the things we expected to happen after a stay was put on Diamond’s motion to sell the consigned goods themselves.

The issue is over consignment inventory, which Sparkle Pop did not purchase in the asset acquisition during the chapter 11 process. Diamond has stated that Sparkle Pop has sold consigned inventory and not passed on the proceeds of the sale to Diamond. Diamond has stated Sparkle Pop has done this despite “multiple demands from the Debtors that it stop all consigned inventory sales and turn over all sale proceeds to the Debtors.”

It’s the latest drama in the chapter 11 case of Diamond that has been filled with drama including multiple lawsuits that are still ongoing.

Diamond in their filing states that Sparkle Pop’s sales are in violation of the court’s stay when it comes to anything dealing with the consigned goods and violates the asset purchase agreement.

Sparkle Pop in the asset purchase agreement obtained inventory defined as:

“Inventory” means all inventory, inventory in transit paid for by Seller, finished goods, raw materials, work in progress, packaging, supplies, parts, and other inventories of the Acquired Business, but excluding any Prepaid Inventory. For purposes of clarification, goods held on consignment by or on behalf of Seller as part of the Acquired Business shall not be considered Inventory for purposes of the Agreement.

Consigned goods was not part of the inventory (the part we put in bold above).

Diamond’s motion hopes to enforce the court’s stay as well as “obtain redress” for Sparkle Pop’s actions which includes “actual damages, reimbursement of legal fees, and punitive damages.”

The filing gives a bit more of a peak behind the deal between Diamond and Sparkle Pop. As expected, Diamond has to pay Sparkle Pop for storage of inventory still at the old Diamond warehouse which Sparkle Pop now manages:

pay [Sparkle Pop] a reasonable fee (to be mutually agreed upon in writing) for the storage (including storage costs) of such [consigned] goods, as well as for any and all out of pocket costs and expenses incurred by [Sparkle Pop] in connection with the processing, packing, shipping, or disposal (“Processing”) of such goods.

Diamond discovered Sparkle Pop was selling consignment goods in mid-June 2025. Diamond then demanded Sparkle Pop stop and hand over the sales to Diamond.

A list prepared by Sparkle Pop indicates that the inventory sold through July 8, 2025 was in the amount of $1,353,364 and additional $31,258.60 was sold between July 9 and July 18.

Diamond was told the sales were stopped but continued according to the motion filed. There are consigned goods listed on Sparkle Pop’s website for sale though Diamond told them in June to remove the goods, and they’d help do so.

Diamond’s basis for relief is:

1. Sparkle Pop Has No Authority to Sell the Consigned Inventory.
2. The Consigned Inventory is Property of the Estate for Purposes of this Motion.
3. Sparkle Pop Violated and Continues to Violate Section 362(a)(3) of the Bankruptcy Code by Selling Property of the Estate Without Authority
4. Compensatory Damages, Punitive Damages, and Corrective Measures Must be Imposed Upon Sparkle Pop to Remedy the Willful Depletion of the Consigned Inventory

Of the four points above, the second’s inclusion of “for purposes of this motion” is important since there’s dispute who really owns the inventory, Diamond or the publishers. A decision about this would not impact the debate as to who really owns the inventory overall.

The exhibits filed along with the motion includes how much was sold by Sparkle Pop broken down by publisher. That includes spreadsheets featuring costs of goods and more.

A motion has been filed as well for an expedited hearing regarding this with a court hearing on September 10 and objections to be filed on or before September 5.