Diamond‘s bankruptcy is officially now in chapter 7 which means any remaining assets will be liquidated to pay back creditors. Individuals are appointed to handle the process and in December Morgan W. Fisher was named the interim chapter 7 trustee. On January 5, Fisher filed a motion to employ Zvi Guttman as the general counsel to the trustee in the case.  Now, Larry Strauss ESQ, CPA & Associates, Inc. has been nominated to act as the accountant to the trustee during the process.

Expected services include:

• analyzing prior financial transactions in order to calculate taxes, preparing necessary tax returns, communicating with taxing authorities regarding the Debtors tax obligations, drafting 505(b) communications, and filing tax returns for the estates;
• Assisting the Trustee with examining proofs of claim;
• Analyzing and reporting to the Trustee regarding any of the Debtors’ financial dealings, transactions, and other activities that may lead to the prosecution of causes of action or recovery of assets; and
• Providing other customary and usual accounting services as requested by the Trustee.

The below hourly rates are mentioned as well as expenses incurred:

Hourly Rates
Partners $ 580.00
Managers $ 455.00
Supervisors $ 405.00
Seniors $ 325.00
Staff $ 195.00

Strauss has over thirty years as an accountant specializing in bankruptcy accounting law and has experience with chapter 7 and chapter 11 cases.

Diamond‘s chapter 11 case was officially changed to chapter 7 in December with Morgan W. Fisher named as the interim chapter 7 trustee. Today, Fisher has filed a motion to employ Zvi Guttman as the general counsel to the trustee in the case. Fisher became the duly appointed interim chapter 7 trustee on January 1. The “employment of general counsel is necessary for the efficient administration of this case and to obtain maximum net recovery of assets for distribution to creditors.”

Services expected to be performed by Guttman include:

• Investigating the Debtor’s financial dealings, transactions, and other activities that may result in the prosecution of various causes of action for the benefit of the estate and its creditors;
• Investigating and pursuing causes of action at the Trustee’s direction, including actions for turnover or avoidance actions under Chapter 5 of the Bankruptcy Code;
• Assisting the Trustee with examining proofs of claim and objecting to the allowance of any claim where a purpose would be served in doing so;
• Preparing complaints, answers, discovery, motions, responses, orders, reports, and other legal papers, in the prosecution or furtherance of actions commenced by or against the Trustee except to the extent that the Trustee retains other counsel in specialized matters (e.g., avoidance actions, pending consignment litigation, and pending litigation with Alliance Entertainment), provided, however, Counsel may assist, coordinate with, or supplement the work of special counsel on such specialized matters as may be required, or as directed by the Trustee. Through this allocation of responsibilities, the Trustee seeks to maximize efficiency without redundant effort or overlap of professional services; and
• Preparing other applications, motions, reports and other legal papers and perform other legal services at the direction of the Trustee which may be necessary in the expeditious administration of the estate.
• Serving as general counsel provide day-to-day legal guidance and oversight of the numerous matters anticipated to arise in this case, while coordinating with litigation counsel who will likely be engaged to handle the bulk of any complex contested proceedings. This division of responsibilities is designed to maximize efficiency and cost-effectiveness in the administration of this estate.

Guttman, a bankruptcy attorney located in Baltimore, would be paid $620 an hour plus further expenses.

Early in the case, Guttman served as the local counsel to NECA whose affiliates include WizKids, Sparkle Pop, and Kidrobot. Sparkle Pop is one of the companies that purchased Diamond’s assets.

In the filing Guttman states he never spoke to the client and filed motions for the client’s New York counsel, made calls to put the New York counsel in touch with the committee and Debtor’s counsel, and helped the New York counsel attend a telephone hearing. NECA has waived any perceived conflict.

You can see the full filings below.

Since it has now been approved, Diamond‘s chapter 7 case moves to its next steps. The first of which is appointing a trustee to handle everything.

A filing today has named Morgan W. Fisher as the interim chapter 7 trustee for Diamond Comic Distributors effective 11:59 pm EST on December 31, 2025. (we thought it would be the 29th or 30th due to the holidays, but.. so close!)

Unless a trustee is elected at a meeting of the creditors, Fisher will serve in the role.

Morgan Fisher is likely this individual who has been practicing for over 20 years.

Diamond‘s motion to move from chapter 11 to chapter 7 has been approved. The order was released on December 19 after some changes to Diamond’s initial plan.

Chapter 7 means an individual is appointed to gathers all of the financial data as to what is owed to who, liquidates all remaining assets, then pays back the creditors. The business is then shut down. This is the official last days of “old” Diamond.

But, what’s the actual process and timeline? The order lays things out pretty well.

1. The case will be converted officially to chapter 7 “effective at 11:59 pm on the fifth business day after the entry of this Order.” With the order filed on October 19, then it should be official on December 26th… though if courts are closed for the holidays it might be the 29th or 30th.
2. An appointment will be made for the chapter 7 trustee. This is the person who manages all of this.
3. 14 days after that trustee is appointed, Diamond will turn over its books and records to the trustee.
4. Within 30 days of the conversion date, around January 25, Diamond will file a schedule of unpaid debts incurred after its chapter 11 case began. That will include the names and addresses of each creditor.
5. Within 30 days after the conversion date, Diamond will provide the Trustee and file a final report as per rule Bankruptcy Rule 1019.
6. Omni, one of the companies helping manage the chapter 11, turns over all of the claims information within 14 days, unless they’re retained for the chapter 7 portion.
7. Professionals involved have 30 days of the conversion date to submit their final fee applications. Objections then have 21 days to be filed. A hearing is then held to consider all of the fees.
8. Omni, a company managing filings and notifications, are relieved of their responsibilities as far as notifications.
9. The Ad Hoc Committee of Consignors gets $156,000 and Consignment Group gets $144,000 to go towards their administrative claims accrued prior to May 15, 2025. The final amount of those claims will be determined later and if it’s less, money will be returned.
10. All contested matters and adversary proceedings in the bankruptcy case are stayed until February 16, 2026.

And that’s where we’re at with more to come in 2026.

Exactly one week ago, Diamond formally submitted a motion to the court to change their chapter 11 to chapter 7. With that submission was a new agreement between Diamond and JPMorgan concerning lending to get them through chapter 7. JPMorgan refused to extend credit further when it came to Diamond’s chapter 11 process, part of the reason for the status change.

The Ad Hoc Committee of Consignors objected to some of the details of Diamond’s proposal including a shift in the time period for some of it, some payments Diamond included, and specifics regarding inventory.

A hearing was held December 16 during which the court was fine with the chapter 7 as a whole but there were suggestions to amend their proposal before it’s finally approved.

Some of the major changes is how the claims will be handled, the timing of some things, but one of the biggest is an escrow account disbursement.

The Ad Hoc Committee of Consignors’ counsel and the Consignment Group counsel will receive $156,000 and $144,000 respectively. The amounts will be applied to each of their asserted administrative claims accrued prior to May 15, 2025.

All contested matters and adversary proceedings in the bankruptcy case are stayed until February 16, 2026.

You can see the new filing as well as the redlined version below.

Update: The order approving the plan has been submitted as well.

This morning a hearing was held regarding Diamond‘s motion to move from chapter 11 to chapter 7. The motion was approved by the court, placing Diamond in chapter 7. It’s the latest turn of events in a drama that stretches back to January 2025. It’s a sad ending to what was once the 800-pound gorilla that dominated comic distribution for decades.

In chapter 7, a court-appointed trustee sells the debtor’s non-exempt assets to pay off creditors allowing the debtors, in this case Diamond, to pay off their debts. A chapter 11 attempts to reorganize and continue the operations. The primary goal of chapter 7 is to liquidate and sell everything, cease operations, and distribute the funds. It also allows owners who personally guaranteed business loans to discharge those personal liabilities.

In January Diamond Comic Distributors filed chapter 11 after courting buyers late in the previous year. An auction for its assets was held in March 2025 with Universal Distribution and Sparkle Pop walking away with parts of the company after drama involving Alliance Entertainment which originally won the bid but since then has gone to court over it claiming fraud against Diamond and its representatives.

Since then, there’s been fights involving consigned inventory, inventory being sold when it shouldn’t have, and what lead to the chapter 7, Diamond’s bank lender JPMorgan Chase Bank no longer willing to provide funding through the chapter 11 process.

Today, Diamond’s motion for chapter 7 was granted with much more to come in this process which is sure to feature more drama and surprises before the final document is signed and filed.

Evidentiary Hearing Held: re: 679 Miscellaneous Relief AND re: 738 Objection AND re: 740 Opposition AND re: 747 Compel(added per Mediation order at p. 960) AND re: 1060 Objection AND re: 1063 Opposition TO BE CONTINUED. 1070 Motion to Convert Case from Chapter 11 to Chapter 7 IS GRANTED. Order to be prepared by Movant.(related document(s) 679 Miscellaneous Relief, 738 Objection, 740 Opposition, 747 Compel(added per Mediation order at p. 960), 1060 Objection, 1063 Opposition, 1070 Motion to Convert Case from Chapter 11 to Chapter 7, 1070 Motion to Convert Case from Chapter 11 to Chapter 7, 1074 Order on Motion to Expedite Hearing, 1080 Objection) (Taylor, Shanita)

Hearing Disposition

After initially submitting an objection to payments concerning Diamond‘s Memphis warehouse today and then withdrawing that, also today, the Ad Hoc Committee of Consignors have submitted a motion objecting to Diamond’s move to convert to chapter 7.

The Ad Hoc Committee doesn’t object to the conversion to chapter 7 from chapter 11 by Diamond but instead in some of the details Diamond has submitted in their initial motion on December 12.

1. Diamond has proposed 14 days for parties to file an objection to any Final Fee Application. The Ad Hoc Committee feels it’s too short of a time period with potential of a lengthy list to review. Also, the period would fall over at least one holiday. Instead, they’re proposing at least 30 days.
2. Diamond has proposed paying nearly $193,250 to key employees. As Diamond currently has no employees and not operating any businesses, the Consignors are objecting to that.
3. Diamond has proposed paying $375,000 to Official Committee of Unsecured Creditors and Debtors’ professionals. The Ad Hoc Committee thinks that’s premature and any payments should come after a trustee is appointed and can better understand the current financial situation.
4. Diamond has proposed paying $128,286 to “Nov Storage Fees – Consignment.” That would go to Sparkle Pop for storing the consigned goods. The Ad Hoc states that Sparkle Pop has underreported the amount of sales it has made of consigned stock and Sparkle Pop may owe Diamond additional sums that have yet to be paid. During Sparkle Pop’s initial purchase of Diamond’s assets there was some wiggle room and the final amount wasn’t listed as it was based on various metrics. Whatever is now due is supposed to be paid December 17, 2025.
5. Diamond has asked for an extension of stay in all of the contested matters, the most notable is the fight concerning consigned goods. Diamond has inventory on consignment and wants to sell the inventory to raise money to pay off its debt. The publishers, whose inventory that originally was, are fighting to take back that inventory. There’s numerous motions and lawsuits concerning this. The Ad Hoc points out that the inventory’s value decreases every day it is held and the stay benefits Diamond and its lender JPMorgan Chase Bank. Sparkle Pop is the one that houses the physical stock and there is no knowledge of the storage conditions and security where it’s all housed.

Below is the “Case Transition Budget” Diamond proposed in their chapter 7 filing.

Case Transition Budget Amount
Claims Agent – Omni (Agent of the Court) (36,508)
Claims Agent – Omni (Noticing of Conversion) (10,000)
Employee Insurance Claims (1,250)
KEIP/KERP (193,250)
Professional Fees – Committee Catch Up (30,000)
Professional Fees – Debtor Catch Up (150,000)
Post Termination Carve Out (225,000)
Sales Tax & Preparation Fees (20,000)
Nov Storage Fees – Consignment (128,286)
Total Expenses (794,294)
Beginning Cash Balance 296,649
Use of Cash (794,294)
Ending Cash Balance (497,645)
**Sparkle Pop incentive Payment due 12/17/2025 – not factored into Adjusted Ending Balance

A hearing concerning Diamond’s motion to move to chapter 7 will be held December 16 at 10am ET.