Category Archives: Alliance vs. Diamond

Alliance vs. Diamond Discovery Dates are Set

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There’s a lot of side quests when it comes to Diamond’s Chapter 11/Chapter 7 drama. There’s numerous lawsuits that have spun out of it, dozens depending on how you want to count them. One of the more dramatic ones is Alliance Entertainment‘s lawsuit against Diamond and its associates.

In April 2025, Alliance Entertainment submitted a complaint against Diamond accusing Diamond of “fraud” and “deception” as far as their relationship with Wizards of the Coast, the company behind Magic: The Gathering. Wizards did not continue its distribution agreement past December 2024 and didn’t inform Alliance. Diamond and its representatives actually attempted to obfuscate it and keep it from Alliance during the deal.

That lawsuit has been slow, but ongoing, and now we have the next steps as it looks like there might be an agreement when it comes to discovery.

Discovery is the process where documents need to be handed over to lawyers allowing them to gather evidence. Emails, documents, internal chats, those are all examples of discovery and it can involve millions of documents depending on the lawsuit.

The following is what’s proposed and differs slightly from the original proposed dates.

The Parties shall make their initial disclosures pursuant to Federal Rule of Civil Procedure 26(a)(1) on or before March 10, 2026.

(a) Discovery Requests. The Parties shall serve all document requests, interrogatories, and requests for admissions on or before March 16, 2026.
(b) Substantial Document Production Completion Date. Document production shall be substantially completed by August 31, 2026.
(c) Fact Discovery Cut Off. Except for Rule 26(a)(1) disclosures, all fact discovery
in this case will be completed on or before October 31, 2026. Fact depositions may be taken at any time prior to the expiration of the fact discovery deadline.
(d) Privilege Logs. Privilege logs shall be produced in accordance with the Federal Rules of Civil Procedure so as to be completed within fourteen (14) business days of the related document production. Privileged communications occurring after April 29, 2025, need not be included on a privilege log.
(e) Experts. The Parties do not presently intend to call any expert witnesses. To the extent that changes, the Parties will meet and confer to discuss deadlines pertaining to expert discovery.

Also mentioned:

3. The Parties will submit a confidentiality order and ESI Protocol to the Court for approval on or before April 3, 2026.
4. Motions to join other parties, and to amend or supplement the pleadings, shall be filed on or before June 1, 2026.
5. Dispositive motions by any party are to be filed by November 30, 2026. Answer briefs in opposition thereto are to be filed by December 30, 2026. Reply briefs are to be filed by January 13, 2027.
6. A hearing on dispositive motions shall be set for February 17, 2027 at 10:00 AM in Courtroom 9-D, Baltimore – Judge Rice.
7. Parties must file pre-trial statements in conformity with Local Bankruptcy Rule 7016-1(b) within thirty (30) days of the Court’s ruling on dispositive motions.
8. Trial time estimate four (4) days.

This is a pretty big step for this case to proceed and looks like we’ll get an actual trial some time in 2027.

Check out the full documents below:

Alliance vs. Diamond Gets Discovery Dates

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There’s a lot of side quests when it comes to Diamond’s Chapter 11/Chapter 7 drama. There’s numerous lawsuits that have spun out of it, dozens depending on how you want to count them. One of the more dramatic ones is Alliance Entertainment‘s lawsuit against Diamond and its associates.

In April 2025, Alliance Entertainment submitted a complaint against Diamond accusing Diamond of “fraud” and “deception” as far as their relationship with Wizards of the Coast, the company behind Magic: The Gathering. Wizards did not continue its distribution agreement past December 2024 and didn’t inform Alliance. Diamond and its representatives actually attempted to obfuscate it and keep it from Alliance during the deal.

That lawsuit has been slow, but ongoing, and now we have the next steps as it looks like there might be an agreement when it comes to discovery.

Discovery is the process where documents need to be handed over to lawyers allowing them to gather evidence. Emails, documents, internal chats, those are all examples of discovery and it can involve millions of documents depending on the lawsuit.

The following is what’s proposed:

(a) Discovery Requests. The Parties shall serve all document requests, interrogatories, and requests for admissions on or before March 16, 2026.
(b) Substantial Document Production Completion Date. Document production shall be substantially completed by June 8, 2026.
(c) Fact Discovery Cut Off. The Parties have agreed that, except for Rule 26(a)(1) disclosures, all fact discovery in this case will be completed on or before July 20, 2026. The Parties have agreed that they may take fact depositions at any time prior to the expiration of the fact discovery deadline.
(d) Privilege Logs. Privilege logs shall be produced in accordance with the Federal Rules of Civil Procedure so as to be completed within fourteen (14) business days of the related document production. Privileged communications occurring after April 29, 2025, need not be included on a privilege log.
(e) Experts. The Parties do not presently intend to call any expert witnesses. To the extent that changes, the Parties will meet and confer to discuss deadlines pertaining to expert discovery.

Also mentioned:

  1. Protective Orders and ESI Protocol. The Parties will submit a confidentiality order and ESI Protocol to the Court for approval on or before April 3, 2026.
  2. Case Dispositive Motions. Any dispositive motions must be filed thirty (30) days after the completion of fact discovery. Answering briefs in opposition thereto are due thirty (30) days later, with reply briefs to be filed fourteen (14) days after the filing of any answering briefs.
  3. Joinder of Other Parties and Amendment of Pleadings. All motions to join other parties, and to amend or supplement the pleadings, shall be filed on or before April 24, 2026.
  4. Pretrial Order. If this adversary proceeding cannot be resolved on dispositive motions, the Parties have agreed to file a Joint Pretrial Report within thirty (30) days of the Court’s ruling on dispositive motions.
  5. Length of Trial. The Parties estimate that the time required to try this adversary proceeding will be four (4) days.

This is a pretty big step for this case to proceed and looks like we’ll get more about the middle of the year when it comes to a resolution and decision, if not before.

Check out the full documents below:

Remember Alliance Entertainment’s Lawsuit Against Diamond? It’s Still Going On.

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With so many lawsuits going on when it comes to Diamond‘s chapter 11, it seems we’ve missed a bit one, Alliance Entertainment’s lawsuit against Diamond Comic Distributors for fraud during the initial bidding process for Diamond’s assets. The last we reported on this was August, so let’s catch up.

The last we left it, the defendants/debtors, were trying to get multiple complaints dismissed and filing counterclaims against each other.

In a lead up to a hearing the defendants submitted multiple replies to support their motion to dismiss some of the complaints. They rely heavily on the Asset Purchase Agreement that was part of the bidding process.

With filings to support those dismissals by other defendents.

There’s also filings to back up the arguments to not dismiss counterclaims.

Which all lead to a hearing and pretrial conference regarding all of this back and forth set for November 17, 2025.

But then Alliance got more filings in to argue for the dismissal of the counterclaim against it by Diamond also focusing on the Asset Purchase Agreement.

And why was all of the above rushed through? Because all of the motions by Diamond and its associates to dismiss the complaints by Alliance were denied! The reasons given were during the hearing and unfortunately that transcript hasn’t been released yet.

So, things continue… To kick off December, Alliance next filed a document responding to Diamond’s counterclaims against it. It’s a pretty standard document where they agree or disagree with facts stated in the counterclaim.

Which was followed up by defendant Raymond James & Associates, Inc.’s responses to Alliance’s complaint about fraud. The only thing that really pops up from that is that they admit information provided to the bidders was redacted, which is part of the whole case.

Followed by responses by Charlie Tyson, Dan Hirsch, and Getzler Henrich & Associates, LLC regarding Alliance’s complaint.

So what does all of the above mean? The complaint from Alliance against Diamond and its associates over fraud moves forward as well as their counterclaim back that Alliance broke the contract it agreed to.

Alliance vs. Diamond Gets Movement with a Counterclaim and Omnibus Opposition

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Alliance Entertainment

While this week has been focused on Diamond’s Chapter 11 hearings, there’s other lawsuits that are orbiting the Diamond Chapter 11 saga. There were two filings in that court case which involves the claim by Alliance Entertainment of fraud by Diamond during the bidding process for Diamond’s assets. Alliance was the winning bid at one point (then they weren’t, then they were again, then they withdrew their bid and weren’t again). They withdrew their bid claiming “fraudulent misrepresentation” by Diamond where they didn’t disclose their relationship with Wizards of the Coast who were ending their distribution deal with Alliance Games (different company than the bidder Alliance Entertainment).

Diamond filed to dismiss the lawsuit by Alliance Entertainment against Diamond Comic Distributors but Alliance has responded to that. Alliance lays out six points, 28 cases, and 2 rules to make their point. It’s a Counterclaim to Diamond’s Counterclaim.

It dives deep into the cases but also goes over the basic facts from Alliance’s perspective of the bidding process for Diamond’s assets:

  1. On January 14, Diamond filed chapter 11, and Raymond James & Associates was hired to commence a sale process for all or substantially of Diamond’s assets;
  2. Raymond James set of a Virtual Data Room featuring 2,145 documents for purchasers and what Alliance calls “limited information.” There’s a distributor agreement between WOTC and Alliance Games from December 8, 2021 and a second amendment dated January 1, 2025 but the expiration dates of the agreement are redacted;
  3. Alliance Entertainment singed a confidentiality agreement on October 2024 which means Diamond was planning on a sale at least 3 months before they declared chapter 11;
  4. On February 11, 2025, the Court entered an order setting a deadline for bids;
  5. Alliance submitted a bid of $51,559,450 which included an assumption of certain liabilities but excluded certain adjustments;
  6. Alliance wired a depost of $3.6 million;
  7. On March 21, 2025, Raymond James notified Alliance it was conditionally approved as a Qualified Bidder but did not meet certain requirements and could not be approved;
  8. After an extension and revisions, on March 23, 2025, Alliance was notified it was a Qualified Bidder;
  9. The auction for Diamond was held on March 24 and March 25;
  10. At the end of the auction, Alliance’s bid of $72,2450,000 was determined to be the highest and “best” bid;
  11. Diamond demanded changes and Alliance agreed to pay $85.37 million for Diamond’s assets;
  12. Diamond then said it would seek approval of the backup bid by Universal Distributors and Ad Populum which was then filed on April 5 which was a “lesser value” than Alliance’s bid;
  13. Alliance filed an adversary proceeding and motion for an injunction to stop the sale;
  14. Alliance’s challenge was successful and they were declared the winner;
  15. Alliance increases its deposit to $8.5 million;
  16. Alliance was to by $85,368,053 at that point with $61,613,309 in cash due at closing with the closing date no later than 5pm ET on April 25.
  17. On April 12, 2025 (the document says 2024) Alliance gets an unredacted copy files and discovers the distribution agreement with WOTC expired on December 31, 2024 and was then extended to March 31, 2025. A third extension was produced that extended it to April 30, 2205. That was signed on March 12 by Diamond and WOTC on April 1;
  18. Alliance Entertainment has now discovered Alliance Games’ relationship with WOTC isn’t what they thought and Alliance Entertainment sees that as a “material adverse change” to the assets;
  19. Diamond’s counsel calls Alliance’s counsel stating WOTC’s distribution agreement ends on April 30. The call happened on April 17;
  20. Alliance attempts to negotiate an adjustment to their purchase price reflecting the loss of WOTC revenue but Diamond “refused to meaningfully engage”;
  21. On April 23, Alliance informs the loss of WOTC would reduce Alliance’s revenue by 25% and “fundamentally alters” the economic projections and Alliance wants a discussion on the impact and necessary amendments to the agreement. If there’s no resolution, Alliance would terminate the purchase agreement on April 24, 2025 at 4pm;
  22. Diamond didn’t engage in discussion so the deal was terminated stating that Diamond’s “breach was incurable” and claiming “fraud.” They also wanted the release of their deposit.
  23. On June 4, 2025 (the filing says 2024), Diamond sent their own letter terminating the agreement which had technically been void since April 2024.

An omnibus opposition to the defendant’s partial motions to dismiss the complaint was also submitted. It lays out 7 arguments for their case along with 54 cases and 1 rule knocking down the defendant’s (which is more than Diamond) reasons they think things should be dismissed.

Both are a lot of legalese and court cases but it’s all an interesting read with a more laid out timeline as to what happened with Alliance’s bid for Diamond’s assets.

Diamond and more Defendants Attempt to Dismiss the Alliance Lawsuit Against Them

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Alliance Entertainment

Alliance Entertainment has a lawsuit against Diamond Comic Distributors, Comic Holdings, Comic Exporters, Diamond Select Toys & Collectibles, Raymond James & Associates, Getzler Henrich & Associates LLC, Robert Gorin, Charlie Tyson, and Dan Hirsch claiming there was fraud committed during the bidding process for Diamond’s assets. This is different than the general Chapter 11 process of Diamond’s or Sparkle Pop’s lawsuit against Alliance. They’re all related though.

At its heart, Alliance claims that the group “misrepresented the status of the Debtors’ relationship with Wizards of the West Coast,” the publisher of Magic: The Gathering. Alliance says that WotC made up of about 25% of Alliance Gaming (one of Diamond’s assets being purchased) revenue and that they conspired to get Alliance Entertainment to pay more than it was worth and on multiple occasions misrepresented Diamond and Alliance Gaming’s relationship with WoTC. In December 2024, WoTC said it wouldn’t renew its distribution agreement with Alliance Gaming. Chapter 11 was filed in January 2025. Alliance Entertainment said that it wasn’t until April that they were informed that Wizards of the Coast would not be renewing its distribution agreement and that Alliance had been attempting to verify that agreement well before but were denied by representatives of Diamond.

Multiple motions have been filed to dismiss counts II through V of the complaint:

II – Fraud
III – Aiding and Abetting Fraud
IV – Negligent Misrepresentation
V – Breach of Implied Covenant of Good Faith and Fair Dealing

There’s a lot more details as to the dealings between Alliance Entertainment and Diamond during the proceedings. The motion to dismiss goes through the Alleged Facts followed up by Legal Arguments as to why they should be dismissed with a lot of references to prior legal cases. The APA (the purchasing agreement) comes up in this case, it’s been highlighted in others, and Diamond and the defendants state there’s a clause that prevents claims “based upon extra-contractual statements or omissions.” Alliance Entertainment made its decision to end its bid, according to the new motion, after learning more details outside of the purchase agreement. Alliance Entertainment then wanted its deposit back but Diamond denied the allegations at which point Alliance Entertainment sued. The defendants call the lawsuit an “obvious play for leverage” to put pressure on Diamond to return the deposit.

In the response, Diamond and the defendants refute Alliance Entertainment’s claim that they attempted to hide the fact Wizards of the Coast was not extending its distribution agreement, calling it “100% false,” even claiming redactions, which Alliance points to as keeping key info from them, are a normal part of the process.

Diamond and the defendants go on to say the allegations by Alliance are vague and all tied together so if one claim falls apart, they all fall apart, it’s further reason it should be dismissed.

Here’s some of the new information out of the following:

  • Alliance Entertainment felt the loss of Wizards of the Coast’s distribution agreement “warranted a downward adjustment of the APA purchase price in the range of $18-$25 million.”
  • Alliance Entertainment’s original bid was $85.37 million in March
  • Alliance Entertainment’s revised bid was $58.9 million also in March
  • Diamond held a belief that Alliance Entertainment always was planning to back out of its bid
  • In April Diamond told Alliance Entertainment that it was going to go with Universal Distribution and Ad Populum at which point Alliance Entertainment agreed to the original agreed upon price
  • Alliance Entertainment’s deposit was $8.5 million

It’s all an interesting read about the back and forth, documents provided, redactions (and how that’s normal) and more. It reads more on technicalities and clauses in the purchasing agreements than an outright denial of obfuscation and fraud and the dismissals are really tied into parts of Alliance’s lawsuit that don’t stand on their own.

You can read all of documents below and there’s a lot to go over. We’ll still pouring over the details!

Key Documents in Ad Populum’s Purchase of Diamond and lawsuit against Alliance Revealed with Juicy Details

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In the lawsuit between Ad Populum/Sparkle Pop and Alliance Entertainment, a motion to seal documents was denied, resulting in numerous business documents to be unredacted. The documents give a deeper insight into the purchase process as well as Ad Populum/Sparkle Pop’s takeover of Diamond’s assets during the Chapter 11 process.

We’ve put together this center featuring more details as well as a timeline concerning the ongoing lawsuit.

Asset Purchase Agreement

Ad Populum/Sparkle Pop purchased Diamond for a previously reported $7,459,050 less any critical vendor payments and amounts owed to NECA, Wizkids, and their affiliates (those companies are sister companies of Ad Populum/Sparkle Pop. In reality, that $7.5 million isn’t the final amount and there’s a formula involved based on a lot of factors that isn’t yet determined and has some due dates. For instance, Sparkle Pop needs to provide a report to (old) Diamond of the “Incentive Amount” which is a formula that makes my head hurt.

There’s also a lot of who is responsible for what and basically, Sparkle Pop and (new) Diamond is not responsible for the debts of (old) Diamond.

In the APA, Sparkle Pop and (new) Diamond was to “offer continued employment to most employees who are principally engaged in Diamond’s business on the same or similar terms as their current terms of employment. Sparkle Pop doesn’t have to provide continuing employment to any of Diamond’s employees, including, without limitation, senior management or executives. (old) Diamond is responsible for any liabilities like severance earned before the closing date of the sale.” Sparkle Pop gutted key staff not long after its takeover.

There is a Termination agreement which likely covers Alliance Entertainment’s not going through with its winning bid of Diamond and its assets.

Transition Services Agreement

Also revealed is the Transition Services Agreement which covers what Diamond needed to provided Sparkle Pop in the handover. While just interesting to read, there’s nothing very juicy as far as details.

Non-Disclosure Agreement

The Non-Disclosure Agreement (NDA) is part of the lawsuit by Sparkle Pop against Alliance Entertainment. The NDA is dated October 26, 2024, almost three months before Diamond declared bankruptcy showing they knew they were in trouble for quite some time. It lays out the terms that bidders had to agree to including:

  1. The Evaluation Material was to only be used to evaluate the transaction, aka buying Diamond.
  2. Anyone that doesn’t win the bid has to return any copies of the evaluation material.
  3. It defines what evaluation material is and that’s basically anything one couldn’t already get other ways.
  4. THIS ONE IS KEY. Until the deal is done, bidders can’t initiate or maintain contact with any officer, director, employee, agent, customer, creditor, supplier, vendor, or other business associate of Diamond without the permission of Diamond’s CEO.

That last point is a key part in the argument against Alliance’s hiring of former Diamond employees. This is mentioned and highlighted in the cease-and-desist letter that was also released and you can read below.

For a period of two years from the date hereof, you shall not solicit for employment or, directly or indirectly, hire any employee of the Company or any of its subsidiaries with whom you have had contact during the period of your investigation of the Company or its subsidiaries or whose identity you learned during such period; provided, however, that the foregoing provision will not prevent you from soliciting or employing any person who: (i) responds to a general solicitation of employment through an advertisement not specifically targeted at the Company or its employees; or (ii) has not been an employee or an independent contractor of the Company for at least one hundred and eighty (180) days prior to the commencement of employment or service discussions between you and such employee or independent contractor. It is understood that all requests for information, tours and meetings, all questions or discussions relating to the procedures in making a proposal and all communications regarding the Transaction will be directed to the Company’s financial advisor, Raymond James & Associates, Inc. (“Raymond James”). The Company shall be free to conduct the process for exploring a potential Transaction as they in their sole discretion shall determine and to discontinue or change such process (including any previously announced rules or procedure) at any time without notice to you, and none of the Company, Raymond James, or any of their respective officers, directors, employees, agents or affiliates, shall have any liability to you as a result of such process.

When Alliance contacted Diamond employees or vice-versa that were hired will be key to the lawsuit.

Employee Manual

Also part of the legal dispute between Sparkle Pop and Alliance is Diamond’s Employee Manual which you can read in its entirety below.

The manual lays out some of the benefits from the company, its history, its organizational structure, and sister companies among other things to open things up.

It makes it clear that employees are “At Will” in 1.01, a key point raised in Alliance’s objection to Sparkle Pop’s lawsuit. It states that employees are free to resign at any time and Diamond can terminate employment at any time.

Use of confidential business information is also a part of the lawsuit and is first mentioned in the document at 1.06 “Non-Disclosure” and lists examples:

  • compensation data
  • computer processes
  • computer programs and codes
  • contracts
  • customer information (preferences, business plans, etc)
  • customer lists
  • financial information
  • marketing strategies
  • pending projects and proposals
  • vendor information and lists

1.07 “Conflicts of Interest” is also important as it specifically mentions employees can’t use company time, equipment, facilities, etc. to engage in or pursue another business or occupation. Sparkle Pop has intimated this was done by employees.

Exit Interviews

Exist Interviews of the employees who left Diamond for Alliance is also an exhibit Sparkle Pop is relying on for their case. Each is key in why individuals left but also gives us an idea of what work life was like at Diamond and thoughts of the employees about the purchase and subsequent communication/management of Sparkle Pop concerning Diamond.

What’s interesting is it features one less exit interviews than those left. Presented are six employees when seven left the company. An exit interview by Mike Schimmel isn’t present and he’s one of the former Diamond employees at the center of the lawsuit. You can read his declaration in support of Alliance that refutes some of Sparkle Pop’s key claims, with evidence.

Lee Butman left for Alliance and said that he sent out his resume for a few months and needed stability for him and his family. A lack of communication from Ad Populum led to the decision. A “Merchandise Team Manager” at Diamond, he is now the “Buyer – Consumer Product Specialist” at Alliance.

Matt Demory also said he needed to do what was best for his family and that Diamond had lost “too many employees and the core competency” and wasn’t sure how Diamond Book Distributors sales was supposed to function. An “Assistant Manager – Print Team” at Diamond, he’s now a “Buyer” with Alliance Entertainment and specifically highlights that Alliance “has their own systems and way of doing things.”

Joe Lunday who was Diamond’s “Director of Ecommerce Sales” is helping Alliance “build the collectibles and toy program.” Lunday mentions his concern over Diamond’s future as to why he was leaving and that morale was very low with Ad Populum providing no communication. Lunday also highlights a meeting with Ad Populum’s owner Joel Weinshanker that was supposed to be 15 minutes but lasted 4 minutes and felt like it was “2 minutes longer than Joel would have liked.” Lunday described the meeting as off putting and that he walked away with the impression the purchase was really just for Diamond’s warehouse. Others had the sim impression.

Trista Peterson was a “Sales Manager” for Diamond and stressed she wasn’t poached by Alliance and had applied for the company months ago which was allowed according to the above bidding agreement.

Sadie Campos was Diamond’s “Business Development Manager” and it was discovered through LinkedIn she was leaving for Alliance. There is again a mention of a lack of communication even when it came to major events like shutting down Diamond Select Toys.

Ryan Shelkett was Diamond’s “Executive Director of Applications Development” and moved to Alliance as their “Vice President of Purchasing.” Shelkett said Alliance contacted him about a job offer but he had been looking for a job since Diamond’s bankruptcy announcement but had stopped because he was told that he’d receive a retention bonus of $16,000 if he stayed which he had not received as of his exit interview. With Alliance Shelkett noted he and Mike Schimmel would be working in completely different departments than their time at Diamond and his employment with Alliance came about after running into someont.

Cease-and-Desist Letter

Finally there’s the Cease-and-Desist Letter sent to Alliance Entertainment. It highlights the section we highlighted above about contact with employees of Diamond and generally highlights what has been mentioned in Sparkle Pop’s lawsuit.

If you want to keep up with this important lawsuit, check back regularly here or our center where you can get all of the information in one handy place including a timeline.

Alliance Entertainment Objects to Diamond’s Motion for its Sale to Universal Distribution and Ad Populum

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Alliance Entertainment

And the drama around Diamond‘s Chapter 11 continues. This morning we received a new motion by Alliance Entertainment, the original winning bidder, that objects to the sale of Diamond’s assets to the back-up bidders of Universal Distribution and Ad Populum.

For those keeping track, originally, Alliance Entertainment won the bid for Diamond during the bankruptcy process. Diamond then said it wanted to go with the “second best” joint bid by Universal Distribution and Ad Populum, then Alliance threatened to sue, and Alliance won the final approval. Then… in a shocking twist Alliance said it was not going through with the bid. We found out that was because Diamond had withheld key information from Alliance during the process and was suing Diamond and its representatives. After Alliance’s pull of its bid, Diamond released a statement that they had other partners and we speculated it was the back-up bidders. Yesterday, Diamond filed a court motion to go with Universal and Ad Populum as well as to speed up the process with a hearing suggested for today. Part of that hearing also has to do with Diamond’s credit with JPMorgan and dates involving that.

In their motion, Alliance says the motions filed by Diamond are “further collusion” to sell their assets to their preferred buyers rather than maximize their value with the highest bid. They also have issues with the hearing on this twist by Diamond being so soon, especially since it was many days ago Diamond said they had new partners and the deal with Universal and Ad Populum isn’t changed much. Alliance is teasing that Diamond waited to file the motion for the new bid and the hearing to rush the deal through with minimal time for response. Alliance is still figuring out if the back-up sale would or would not provide more value to the Diamond.

You can read the full motion below.

Alliance Entertainment Submits Complaint Against Diamond Claiming Fraud and Deception

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Diamond Comic Distributors

Diamond’s Chapter 11 process has been filled with twists and turns. Originally, Alliance Entertainment won the bid for Diamond in the bankruptcy process. Diamond then said it wanted to go with the “second best” joint bid by Universal Distribution and Ad Populum, then Alliance threatened to sue, then Alliance won the final approval. Then… in a shocking twist Alliance said it was not going through with the bid.

We’ve speculated as to why this was the case and now we know why. Alliance is accusing Diamond of “fraud” and “deception” as far as their relationship with Wizards of the Coast, the company behind Magic: The Gathering. Wizards did not continue its distribution agreement past December 2024 and didn’t inform Alliance. Diamond and its representatives actually attempted to obfuscate it and keep it from Alliance during the deal.

Alliance Entertainment has submitted a complaint to the court.

  1. 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. On March 6, 2025 and April 9, 2025, Defendants repeatedly and intentionally represented that Debtors’ relationship with WOTC remained strong and in good standing. Defendants knew this was false. As Plaintiff recently learned, in December 2024, prior to the Petition Date (defined below), WOTC decided that they would not renew the Distribution Agreement (defined below) beyond the December 31, 2024 termination date, thus reducing the Debtors’ Alliance Gaming Business revenue by at least 25%, other than a short 90-day extension as an accommodation to assist the Debtors in their upcoming bankruptcy case and to induce the Debtors to grant WOTC critical vendor status upon the Debtors’ receipt of authority to grant such status to certain vendors. Upon information and belief, the Debtors were aware of WOTC’s decision in December 2024.
  2. Defendants kept this closely guarded secret from Plaintiff, all other bidders in the Auction (defined below), and the Court. For example, Defendants redacted the termination dates from the WOTC agreements that were disclosed to Plaintiff (and, presumably, other bidders). A sliver of truth came to light on April 12, 2025, only after the execution of the AENT APA (defined below) and entry of the Sale Approval Order (defined below), when the Debtors, for the very first time, provided Plaintiff with an unredacted copy of the Distribution Agreement and its amendment, revealing the imminent termination of the WOTC relationship. The Debtors then waited another five days before revealing, for the first time, on April 17, 2025, that WOTC would not renew the Distribution Agreement.
  3. Far from confessing to their deception, on April 17, 2025, Defendants feigned outrage, calling the termination “shocking,” “coming out of nowhere,” and a “slap in the face,” given the Debtors’ twenty-five-year relationship with WOTC. Defendants’ falsehoods were finally laid bare on April 21, 2025, in a video conference involving WOTC, AENT, and the Debtors. WOTC revealed that its decision to terminate the Distribution Agreement was made—and the Debtors were aware of the decision—in December 2024, because the Debtors’ business with WOTC had declined by more than 8% over the last four years, during which period each of WOTC’s other four distributors had significantly increased their sales. Importantly, Debtors did not refute WOTC’s characterization on the video conference.
  4. After this revealing call, AENT tried to salvage the WOTC relationship by proposing to pay WOTC a fixed sum and agreeing to minimum purchase commitments, in exchange for WOTC extending the Distribution Agreement through December 31, 2025. WOTC rejected the proposal.
  5. AENT still sought to move forward with closing the AENT APA transaction, subject to an adjustment in the purchase price to reflect the loss of the WOTC relationship, but the Debtors refused to engage in those discussions. Left with no other option, AENT issued a Notice of Material Adverse Change on April 23, 2025 and terminated the AENT APA on April 24, 2025, as was its right to do pursuant to section 8.1(f) of the AENT APA, based on a Material Adverse Change in Debtors’ operations. A little more than a day later, the Debtors announced that they were moving forward with the sale of Debtors’ assets to another party, the identity of which has not been disclosed.
  6. In addition to defrauding Plaintiff, costing it millions in fees and expenses since its initial bid submission, the Debtors now refuse to return AENT’s earnest money deposit of $8.5 million, providing no reasonable justification for doing so.

In the filing, Alliance has stated this is why they terminated the purchase after Diamond refused to lower its purchase price. There’s five specific complaints within the motion against Diamond and its representatives in the process. Alliance seeks damages of $8.5 million, plus accrued interest and further damages during trial.

You can read the full complaint below but this is a bombshell. With the threat of being moved to Chapter 7, is this the end of Diamond?