The Diamond Bankruptcy Saga Continues: Sparkle Pop Pushes Back on the Settlement

Just when it looked like the consignment inventory dispute in the Diamond Comics bankruptcy might finally be settled, it isn’t. Sparkle Pop — the company that bought Diamond’s assets and now runs the Olive Branch warehouse — has formally objected to the proposed settlement between the Diamond Estate and the group of publishers who had inventory on consignment (the “Consignment Group”).

Quick refresher: what was the settlement supposed to do?

The deal would have let the Consignment Group members go retrieve their own inventory from the warehouse, while the Estate collected over $800,000 that Sparkle Pop was holding in escrow from prior sales. The settlement also spelled out detailed rules for how publishers would pick, pack, and haul away their goods.

So why is Sparkle Pop objecting?

Sparkle Pop’s argument, boiled down: this settlement doesn’t actually fix anything — it just gets the bankruptcy Trustee and Chase Bank off the hook while dumping the real fight onto Sparkle Pop and the publishers. A few of their specific complaints:

• They want to get paid too. Sparkle Pop says it’s owed roughly $433,000 in processing fees for selling consigned goods (even after the court told it to stop), plus about $1 million in rent and storage costs — and this settlement doesn’t pay any of that.
• They didn’t agree to any of this. As a third party, Sparkle Pop says it’s being forced to accept terms — like the pick-and-pack procedures — that it never signed off on.
• Safety and logistics concerns. The warehouse has floor-to-ceiling racking, heavy inventory stored up high, and a secured “bonded” area with its own compliance rules. Sparkle Pop argues that letting outside publisher reps wander in to locate and haul out their own stock is a liability and safety nightmare.
• It doesn’t end the fighting. Sparkle Pop’s view is that the settlement just shifts the dispute from “Estate vs. everyone” to “Sparkle Pop vs. the Consignment Group,” meaning the same court will still have to referee endless disagreements — just under a different name.

A companion write-up from Graphic Policy considerably more blunt about Sparkle Pop’s complaints, essentially accusing them of playing the victim, given that it bought Diamond’s assets fully aware it was stepping into the middle of an ownership dispute it couldn’t unilaterally resolve.

The wrinkle: Sparkle Pop was selling consigned goods

Because there’s always a glitch, and frankly we’d have been surprised if there hadn’t been one, here’s a twist worth noting: when Diamond’s assets changed hands, nobody separated the consigned inventory from everything else, and it was never removed from the website or ordering system. So for a while, Sparkle Pop says it was unknowingly fulfilling orders for inventory it didn’t actually own — not intentionally profiting off someone else’s stock, just inheriting a mess. This creates a liability on their part. Now they have to pay the consignees from money they don’t actually have.

And then there’s Chase Bank

Chase was Diamond’s one secured creditor, having kept lending money even after the bankruptcy filing. Chase has now weighed in too, essentially saying the settlement is fine — as long as everyone remembers the estate still owes them $6,541,667.19.

There’s also a subplot: Sparkle Pop has apparently been negotiating separate settlements with the Trustee and the publishers not covered by this particular deal. Those talks have reportedly gotten close to an agreement — except Chase hasn’t signed off, and the Trustee is insisting Chase has to be on board before anything moves forward.

Where does that leave things?

Things aren’t quite back to square one, but it’s close. Now the bankruptcy judge gets to sort out whether Sparkle Pop even has legal standing to object in the first place — and if so, how to untangle everyone’s competing claims.

This whole mess arguably traces back to the original bankruptcy trustee’s decision to sell off Diamond’s inventory over a year ago instead of handling it more carefully. That early move is a big reason the current Estate is now bleeding cash on storage and rental fees. And if this saga wasn’t tangled enough already, it looks like Diamond founder Steve Geppi and his holdings may still be personally on the hook for what’s owed to Chase under the original loan agreement.

The comics industry keeps moving regardless — but this case is far from over. More to come.