Sale of Diamond Comic Distributors canceled due to fraud allegations

Diamond Comic Distributors, a well-known comic book giant based in Hunt Valley, Maryland, encountered a tumultuous turn of events in its recent bid for sale. Initially filing for bankruptcy in January, Diamond had a potential buyer lined up – Alliance Entertainment. However, the sale was abruptly canceled, leading Alliance to take legal action against Diamond, alleging fraud.

The sale process had already been contentious, with Alliance emerging as the winning bidder in a bankruptcy auction. Despite this, Diamond attempted to sell to a different buyer, prompting Alliance to file a lawsuit accusing Diamond of acting in “extreme bad faith.” A federal judge intervened, instructing Alliance to drop the lawsuit and allow the sale to proceed. Seemingly settled, the situation took a drastic turn when Alliance opted to terminate the purchase of Diamond, along with a resignation from a board member, Thomas Finke.

In a further escalation, Alliance filed a lawsuit against Diamond in federal court. The lawsuit highlighted allegations of deliberate inflation of Diamond’s business value by tens of millions of dollars, describing it as part of an intentional scheme. Specific focus was placed on Diamond’s misrepresentation of its contract with gaming manufacturer Wizards Of The Coast, publisher of the popular card game “Magic: The Gathering.” Alliance claimed that changes in the contract significantly impacted Diamond’s value. Furthermore, Diamond was accused of withholding Alliance’s $8.5 million deposit, as outlined in the lawsuit.

Adding complexity to the situation, the U.S. trustee overseeing Diamond’s bankruptcy recommended a conversion from Chapter 11 to Chapter 7. This shift would entail a liquidation of Diamond’s assets instead of reorganization or finding a new buyer. Despite this development, Diamond expressed confidence in securing new buyers, promising forthcoming announcements. Chief Restructuring Officer Robert Gorin emphasized the anticipation of partnering with reputable companies boasting robust financial standing and industry expertise.

Originating as a modest Baltimore enterprise managed by Steve Geppi in the 1970s, Diamond underwent significant expansion to become a dominant player in comic book distribution nationwide. With a prominent role in industry initiatives like Free Comic Book Day, Diamond held a pivotal position in the comic book market before facing recent challenges. Amid the uncertainties surrounding its sale and bankruptcy proceedings, Diamond’s legacy and future prospects remain subjects of keen interest within the industry.