Although I wrote “It’s over” yesterday in regard to the Battle of the Consignment Stuff, it is not quite over. The judge must approve the settlement (almost certain) and then the publishers must actually get their stuff back.
While I put together a very quick summary of the legal filings yesterday, Graphic Policy (who I have been regularly conferring with throughout this entire mess) has an excellent and more careful read – much of what I am about to report is also covered there so you can go have a read. I have also been in contact with some close observers of the case, and have some general observations.
This was a legal victory for the publishers. As the motion states:
“The Trustee agrees and acknowledges that the Consignment Group Members were the owners of their respective Consignment Inventory at all times prior and subsequent to the Petition Date, and that the TSA did not permit or authorize Sparkle Pop to sell, distribute or dispose of Consignment Inventory on behalf of either the Consignment Group Members or the Debtors other than in accordance with the Distribution Agreements and at the Debtor’s sole and express direction.”
However, as we know, the word “pyrrhic” is often put in front of the word victory, and while this isn’t a loss, it did come at great cost. To recap some of what went before (it has been a long time) when Diamond’s bankruptcy was a Chapter 11 (reorganization) then bankruptcy administrator, our old friend Robert Gorin, decided to sell the consignment inventory to help pay off a massive debt to Chase Bank – a debt incurred when Diamond was doing “business as usual” post bankruptcy, including paying employees and so on.
That set off a chain of hearings and motions as two groups of creditors, The Ad Hoc Committee, and the Consignment Group, sought to block the sale and Get Their Stuff Back. And also led to the trustee filing 30 separate adversary proceedings against individual publishers to lay claim to the inventory.
Once the case was converted to Chapter 7 (liquidation) a new trustee entered the picture, Morgan Fisher, but he had the same problem: paying the secured creditors, including Chase Bank.
It seems to me – based on my own observations, conversations with stakeholders, and reading the filings – that he had another problem: all of the consigned goods were under the control of Sparkle Pop, which was asking for a lot of rent money to store the goods. Hearings seemed to often revolve around whether the goods were being cared for, and Sparkle Pop’s own complaints that they had all this stuff hanging around.
Also, Sparkle Pop had been selling consignment inventory from May 15th to mid October 2025. While the word “illegal” may not be quite right, it was definitely against the contracts that had been agreed to. So that wasn’t really a confidence booster.
In fact, there’s a final statement in the motion that really sums all this up, including the “burdensome cost.”
The Parties believes the Settlement is in the best interest of the Estates. It eliminates a burdensome administrative cost that is being asserted by Sparkle Pop with regard to the continued storage of the Consignment Inventory at the Warehouse; it relieves the Trustee from any further involvement in the CG Adversary Proceedings of the Settling Parties and the Appeal; it provides a substantial cash infusion to the Debtors’ Estate; and it protects the Consignment Group Members from further erosion of value of their Consignment Inventory as well as prevents the flooding of the market with respect to unauthorized sales of their inventory.
My understanding is that this settlement has been in the works for months, but getting Sparkle Pop to agree to it was often a sticking point. While dragging things out and getting publishers to give up in frustration may have been part of the original plan (as it often is in such bankruptcies), Trustee Fisher seems to have decided that delays meant paying more money to Sparkle Pop and settling things sooner rather than later was a better course of action.
The leverage in the matter was actually money that Sparkle Pop had paid to the trustee and been put in escrow over the previous sale of the goods: $669,410.00 in “proceeds from certain sales of the Consignment Group Member’s collective Consigned Inventory that were made after May 15, 2025 through approximately mid-October 2025, for Consignment Group Inventory that was delivered prior to May 15, 2025.” And another $273,503.00 in ”proceeds from certain sales of the Consignment Group Members’ Consigned Inventory.”
Technically, this money was due to be paid to the publishers – as you may recall Diamond’s business was distributing comic books and toys and collecting the money for publishers. The settlement calls for the money to be retained by the estate, so publishers essentially gave up their claim to nearly $1 million, less $50,000 to be paid to them.
But suspicions over just what Sparkle Pop has sold remains, according to the settlement:
The Consignment Group Members maintain that Sparkle Pop has not fully funded the Court Registry Escrow or the SP Escrow and, additionally, sold or removed from the Warehouse additional Consignment Inventory that is not yet disclosed such that amounts in addition to the SP Escrow and Court Registry Escrow have not been funded but remain due.
Indeed, the proceedings for getting the inventory back is laid out in minute detail, leading up to the glorious phrase “have Sparkle Pop pick, pack, palletize, and make available for pick-up by each Consignment Group Member.” A key element is that the Consignment Group publishers can either send in folks to pik&pak palletize the goods, or hire Sparkle Pop to do it at comparable rates:
Sparkle Pop is entitled to pick and pack the inventory identified by the Consignment Group Members, at rates comparable to what the Consignment Group Members can obtain from other third parties to complete the work. If Sparkle Pop declines to do the pick and pack work at comparable rates, the Consignment Group Members are authorized to access their Consignment Inventory and remove it from the Warehouse under the timelines set forth in the Settlement.
My general impression of all this is that if it were an action movie, the heroes overcame the evil wizard but found that the evil wizard had left a dragon’s egg in the castle, and before they can get the treasure, NOW they have to fight the dragon.
Much of the language is about getting Sparkle Pop to cooperate and contingency plans if they don’t – or if there are MORE undiscovered sales, or Sparkle Pop wants damages:
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The Consignment Group Members are reserving all rights with regard to any additional claims against Sparkle Pop. In the event any Consignment Group Member recovers additional funds from Sparkle Pop on account of unauthorized sales of or shortages in the Consigned Inventory in excess of the Court Registry Escrow and SP Escrow, such Consignment Group Member shall pay five percent (5%) of any such recovery to the Estates, net of any legal fees and expenses required to collect such amounts.
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In the event Sparkle Pop obtains a judgment against any Consignment Group Member for rent, storage, or similar charges with respect to such Consignment Group Member’s Consigned Inventory stored at the Warehouse, that Consignment Group Member shall have an Administrative Claim against the Estates in an amount equal to 25% of such claim.
I’ve heard anecdotally that people who got their inventory back already didn’t always get it back in the best shape, or easily. So concerns may be justified.
The whole case is winding down, though. There was another motion by the Trustee, yesterday, one requesting that notifications be limited to fewer people – at one point there were about 30,000 people getting notices, and the administrative cost was another “burdensome” matter to the estate. Notifications will now be electronic for the most part.
It is really over? Well a framework has been agreed to for publishers to regain their inventory – or have it destroyed if they prefer. The actual mission may be more difficult, but it will eventually be resolved HOPEFULLY without further legal wrangling.
But we have a few loose ends still to come.
WHAT ABOUT THE OTHER PUBLISHERS? My understanding is that this was kind of a “class action” and other consigners can join in the settlement with a few caveats:
Accordingly, to the extent other consignors (outside of the Otherwise Represented Consignors) wish to join this Settlement as Settling Parties, they must reach a resolution with the Consignment Group Members and its counsel on a fee and expense sharing arrangement solely in the discretion of the Consignment Group Members (meaning the Trustee will not participate in any such matters). For the avoidance of doubt, nothing herein or in the Settlement precludes the Trustee or any other consignor from reaching a resolution if (and after) the Court approves the Settlement.
WHAT ABOUT THAT CHASE DEBT? When last we looked, in April, the estate had borrowed another $8 million from Chase. This was at a time when it was in Chapter 7 and had no assets or income. Chase Bank hasn’t been heard from in a while, and another $1 million can go towards that debt, but there still seems to be an outstanding balance. As we pointed out alllllllll the way back in January of ‘25, the guarantor of the original Chase loan was Steve Geppi himself, through several of his subsidiary companies. This bankruptcy could drag on for a while yet.
WHAT ABOUT THE RENT THE ESTATE OWES SPARKLE POP? Well, see above. While the rate of filing and reporting has slowed considerably, as it is quite expensive, I expect there will be another reckoning or two over this rent.
WHAT ABOUT JOEL WEINSHANKER? The owner of Sparkle Pop, NECA, Whiz Kids and many other formerly distressed assets continues to hoover them up! Ad Populum, the parent company of Sparkle Pop, just bought the Canadian Toys R Us, which was still operating but has gone into the Canadian version of Chapter 11. He also recently bought a stake in Dracula’s Castle to go along with Graceland, which he manages. And he also put his custom designed home in Miami Beach on sale for $49.5 million. He’s a busy guy.
WHAT ABOUT THAT OLIVE BRANCH WAREHOUSE? As I pointed out a few times, Diamond only leased this facility, and Sparkle Pop has taken up the lease. Most of Diamond’s non-consigned inventory was liquidated last year, but Diamond Select Brands continues to distribute several toy/collectible lines, as part of Enesco, another Ap Populam company. What this huge and complex facility will be used for after all those consigned goods are gone is a loose end for sure.
WHAT ABOUT THE PAIN AND TOIL OF ALL THIS? I check the Diamond Bankruptcy filings at Court Listener every day, and for months there has been nothing but returned mail, as the settlement was being hammered out. But observers basically foresaw this outcome months ago. Dragging things out ultimately benefitted no one and just racked up more debts.
I think there are still a few chapters to be written in all of this, but essentially, publishers should be able to put the Diamond Matter behind them, and go back to more interesting things, like the current comics boom. Unless…there’s yet another dragon egg out there. Let’s hope not.
