In August, the Ad Hoc Committee of Consignors, a group that represents a bunch of publishers, filed a motion in (old) Diamond‘s chapter 11 process attempting to get clarity as to who is selling consigned goods. The consigned goods are inventory that is currently at the center of a legal fight between (old) Diamond and comic and game publishers as to who “owns” them and if (old) Diamond has a right to sell the goods.
In a response to the Ad Hoc Committee’s motion (old) Diamond revealed that Ad Populum/Sparkle Pop had been selling consigned goods when they never purchased them and that (old) Diamond had told them to not do that with threats from their lawyer. Sparkle Pop was one of the winning bidders that purchased assets from (old) Diamond for their own (new) Diamond. That purchase of assets didn’t include consigned goods.
Most recently, Diamond filed a motion against Sparkle Pop wanting the court to force Sparkle Pop to stop selling those consigned goods as well as “compensatory damages and punitive damages.” It is believed to be around $1.38 million worth of inventory has been sold.
Today, Sparkle Pop responded back to Diamond’s motion objecting to it and basically pointing a finger at Diamond’s incompetency.
In Sparkle Pop’s filing, they describe themselves as being “thrusted” “in the middle of their dispute with the consignors to use as a scapegoat and to obtain interim monetary relief.”
Sparkle Pop objects to any expedited treatment of the dispute between it and Diamond because:
- That it is no longer selling any Consigned Inventory; and
- That the proceeds of any Consigned Inventory sold since May 15, 2025 have been segregated and are being held pending clear instruction or Court order regarding who is entitled to the proceeds of those sales.
In short, Sparkle Pop is admitting they sold the goods and just waiting to hear what they should do with the money gained from it. Should it go to Diamond, or as the Ad Hoc Committee has recently motioned, go to the publishers?
In our original article where Diamond pointed the finger at Sparkle Pop for selling the consigned goods, we asked how this could have happened? All it’d take was Diamond zeroing out the consigned goods in the database it handed over to Sparkle Pop to prevent this. It couldn’t be that simple, can it?
The answer is, Diamond really is that incompetent.
From Sparkle Pop’s filing, Diamond made no effort to remove the consigned goods from their website when they handed it over to Sparkle Pop.
According to Sparkle Pop, Diamond also “did not segregate, remove, transport or otherwise dispose of the Consigned Inventory from the Olive Branch, Mississippi warehouse facility that Debtors sold to Sparkle Pop.”
All of that made it difficult for Sparkle Pop to distinguish between the consigned inventory and non-consigned inventory among the commingled goods. This would also hint that Sparkle Pop didn’t inspect the inventory it purchased to make sure what was purchased was present. If they did, they would have come across inventory not on their purchase list… even if they were given a list of the purchased inventory (or could have been given a list of inventory that included the consigned goods).
Sparkle Pop in their filing say they just filed orders that came through the website that Diamond handed over to them as part of regular business. It didn’t go out of its way to sell the consigned goods.
Sparkle Pop further argues that if they didn’t sell the inventory, the consigners (aka publishers) might come after Sparkle Pop “for failing to secure value-maximizing sales in the ordinary course of business, and in continuation of the business expectations the consignors had developed during the course of their relationships with” Diamond. The goods, Sparkle Pop argues, lose value over time. So, it was in the publisher’s best interest they sell them.
Sparkle Pop then claims when it recognizes it was selling consigned goods, they put any proceeds from the sales into a separate bucket so they could eventually be given to the “rightful party.”
Further clarifying the timeline of all of this:
- May 27, 2025 – Sparkle Pop informed vendors, including consignors, that Sparkle Pop had taken over ownership of Diamond’s assets and operating the business.
- For a month after Sparkle Pop fulfilled orders including consigned goods placed through its website with no objection from Diamond.
- June 8, 2025 – Diamond contacts Sparkle Pop telling them they needed Diamond’s consent to “process sales of Consigned Inventory” and Sparkle Pop should “cease honoring all sales of Consigned Inventory.”
- Sparkle Pop was still receiving shipments of Consigned Inventory to the distribution warehouse for sale.
- They continued to sell consigned goods with Diamond’s knowledge since they told vendors they were in charge of sales now and vendors kept sending Consigned Inventory.
- August 2 – The Ad Hoc Committee of Consignors files their motion to find out who is selling the consigned goods.
As far as how much was sold. Sparkle Pop claims they generated:
$1,051,575 and $515,866 in revenue for Consigned Inventory received prior to Closing and after the Closing, respectively.
Sparkle Pop incurred approximately $251,897 and $181,373 in costs, including shipping, packaging, and other costs associated with honoring sales of Consigned Inventory received prior to Closing and after the Closing, respectively.
Sparkle Pop also states they expected Diamond would reimburse Sparkle Pop for the costs associated with processing the Consigned Inventory which is required under one of their agreements, the TSA, which states Sparkle Pop can process Consigned Inventory.
Read all of Sparkle Pop’s objection below as well as a declaration by Steven Bieg, the Chief Financial Officer of Ad Populum.
