A US bankruptcy court has formally ordered Sparkle Pop, the company now operating Diamond Comic Distributors’ business, to immediately cease all sales of disputed stock that legally belongs to publishers. The order is the latest development in a fierce battle over “consigned” comics, roleplaying games, and other merchandise caught in the distributor’s collapse.
The company at the centre of this order, Sparkle Pop, is the operational name for the part of Diamond’s business acquired by Ad Populum. Ad Populum, alongside Universal Distribution, became the new owner of Diamond’s assets after a chaotic and contentious auction process. The initial winner, Alliance Entertainment, walked away from the deal following legal disputes, paving the way for the runner-up bid from Ad Populum and Universal to succeed.
This latest court intervention focuses on consigned inventory. In the distribution industry, this refers to products that publishers provide to a distributor to sell on their behalf. The stock remains the publisher’s property until it is sold to a retailer. Following its bankruptcy filing, the old Diamond entity (referred to as the “Debtors”) moved to liquidate this publisher-owned stock to pay its creditors, a plan that horrified publishers, including TTRPG companies like Paizo.
Sparkle Pop, having taken over Diamond’s warehouses and websites, found itself in possession of millions of dollars’ worth of this disputed stock. According to court filings, the company faced a “choice between two evils.” The old Diamond Debtors had not removed the consigned items from the sales website or segregated them in the warehouse. With orders still coming in, Sparkle Pop claims it continued to fulfil them, tracking the sales and setting aside the proceeds. The alternative, it argued, was to refuse sales, potentially incurring liability and allowing the value of time-sensitive products to decline.
Steven Bieg, Chief Financial Officer of Ad Populum, explained in a filing that they believed the Diamond Debtors had “all but abandoned” the inventory and that their actions were merely maintaining the status quo. The company reported generating over $1.5 million from these sales, while also incurring nearly $500,000 in shipping and handling costs.
The new court order, however, puts a firm stop to this practice. It compels Sparkle Pop/Ad Populum to remove all consigned inventory from its websites and marketing materials, halt all sales, and provide a detailed accounting of every consigned item sold since they took over. Furthermore, all proceeds from these sales must be deposited into the court’s registry to be held in escrow until the ownership dispute is settled.
In response, Joel Weinshanker, CEO of Ad Populum, has already filed a certification with the court. In it, he states that the company has complied with the order and asserts that they had already ceased all sales of consigned stock before the motion was even filed at the start of September.
While this order resolves the immediate issue of Sparkle Pop selling the stock, the core conflict is far from over. The fundamental question of whether the inventory – and the money generated from its sale – belongs to the original publishers or to Diamond’s creditors remains to be decided in future hearings, with the next one now delayed until 22nd October.
