After the twisty diamond bankruptcy over the past few days, we know that almost anything can happen, but the latest bombshell still feels that: a bombshell. If the allegations I’m reporting are true, almost everything we’ve been reporting has to be placed in different angles in different ways – because that may not be accurate. The terms “program” and “fraud” are abandoned a lot.
As Brett Schenker first reported in Graphic Policy, the now twice-rejected Diamond Asset Buyers Alliance Entertainment (Aent) has filed a complaint against diamonds and their representatives, alleging fraud and deception. Although Diamond is the defendant, most of the complaints are spent on the actions of co-defendant Raymond James (the banker and negotiator of Diamond) Robert Gorin, Charlie Tyson and Dan Hirsch.
These last three names are key because they are the main negotiators who make purchases. Gorin is the managing director of Getzler Henrich, the company was hired to oversee its restructuring, Gorin is their co-chairing restructuring officer and has been described as the “architectural for the debtor’s fraud” in the complaint. Tyson and Hirsch are described as co-CEOs of Alliance Games (another alliance in the matter and one of the main assets Aent wants to acquire.)
As the Graphic Policy says, the three deliberately suppressed the message of the Coast Wizards (WOTC, Magic The Chaption, many other things) has terminated their contact with 12/31/24 while extending it for months to help bankruptcy.
The termination of a contract is determined by judging the contract end date on the contract end date of the documents provided to them. The actual date appears only after Aent wins the auction and agrees to purchase a price of $72,245,000.
What allegedly happened was so surprising that I just need to quote the complaint here:
On April 12, 2025, only after the execution of the AETS APA (definition below) and the entry of the Sales Approval Order (definition below) was revealed that the impending termination of the WOTC relationship was revealed when the debtor first provided the plaintiff with an unedited copy of the distribution agreement and its amendment. The debtor then waited for another five days before revealing for the first time on April 17, 2025 that WOTC will not renew the distribution agreement.
On April 17, 2025, the defendants did not admit their deception at all, but assumed that the termination was “shocking” and “everywhere”, which ended “everywhere” and “a slap on the face” given the debtor’s twenty-five-year relationship with the WOTC. The defendant’s forgery was finally revealed on April 21, 2025 in a video conference involving WOTC, Ait and the debtor. WOTC revealed that in December 2024, the debtor’s decision to terminate the distribution agreement over the past four years was aware of the decision as the debtor’s business fell by more than 8%, during which time each of WOTC’s four other distributors increased its sales significantly. Importantly, the debtor did not refute the characteristics of the WOTC in video conferences.
After this initiating call, Aent attempted to save the WOTC relationship by proposing to pay a fixed amount to WOTC and agreeing to a minimum purchase commitment in exchange for WOTC to extend the allocation agreement to December 31, 2025. WOTC rejected the proposal.
Aent still tries to move forward by closing the APA deal, but adjusts the purchase price to reflect the loss of the WOTC relationship, but the debtor refuses to engage in these discussions. No other option, Aent issued a notice of material adverse changes on April 23, 2025 and terminated the APA on April 24, 2025, under the rights of Article 8.1(f) of the AENT APA in accordance with material adverse changes in the debtor’s business. A day later, the debtor announced that they would sell the debtor’s assets to the other party, whose identity has not been disclosed.
Just, wow.
Aent is seeking to obtain its $8,500,000 deposit (plus interest) and seek injunctive relief for breach of contract, fraud, help and teach traud fraud, negligent misrepresentation, and breach of implicit honest faith and fair dealings.
As revealed in the complaint, their purchase was terminated, not because of any tariff concerns, but because the loss of WOTC as a supplier would constitute an “adverse change” in the diamond/affiliated business: WOTC accounts for 25% of the alliance’s revenue.
Iente claims they tried to negotiate several times with Diamond and its agents in view of the loss of such a significant business, but Diamond did not respond. They even said that if they could negotiate a new agreement, they would still consider buying diamonds… Given that all of the above agreements seem rather generous.
The actual complaint details the story…although it is basically just a description of the zoom call between Attorney Ironte and Gorene, Tyson and Hirsch, it still depicts a fair amount of photos. Ient seems to be getting more and more depressed, and diamonds seem to be getting more and more desperate, sometimes becoming ghosts. If you’ve been following a reading for so long, you might want to read it yourself, but some colorful details in the complaint:
The meeting with Jeff Walker, representing Aent and Tyson, Hirsch and Gorin representing Diamond, seemed to be a particularly important day.
[AENT] Ask about the status of the debtor’s relationship, including WOTC. Each of Tyson, Hirsch and Gorene’s defendants once again falsely stated that the debtor’s relationship with the main suppliers was strong and stable, and the debtor maintained a good reputation with them. Defendants Tyson, Hirsch and Gorin knew the statements were false, but they made them intentionally anyway.
In the section titled “The Defendant knew about the decision of WOTC in the section entitled “It turns out that WOTC decides not to renew the allocation agreement before the petition date”.
At 4:36 pm on April 17, 2025, the debtor’s lawyer was called Aent’s lawyer and noted that the WOTC distribution agreement was due on April 30, 2025, and that the WOTC had communicated to the WOTC that they did not intend to renew the agreement. This is the first time the debtors admit that their relationship with the WOTC is not good, contrary to their previous representatives. The debtor is aware of the impact of this revelation on employee morale and the debtor’s ability to continue operations, and the debtor begged not to raise this question on a daily “all-round hand” conference call at 5:00 pm every day.
Further revelation was a delayed Zoom call with Aent, Gorin, Hirsch and Tyson and WOTC President John Hight and Brian Trunk, vice president of Global Income and Wizard Play Network. Trunk revealed that the contract had been terminated for a long time, with diamond sales down 8%, while other distributors showed growth, a statement saying the diamond side seemed to have accepted it silently.
Later negotiations with Raymond James lowered the purchase price to reflect the difficulty of WOTC’s losses, which didn’t sound very pleasant.
On April 23, 2025, at 11:00 a.m., the debtor, the defendant Getzler Henrich, the defendant Raymond James and the debtor’s lawyers were met at a video conference to discuss the impact of the WOTC’s termination of the distribution agreement on the debtor’s business. The debtor opened the phone and said they were going to “listen only” and not ready for meaningful discussions. There is evidence that the loss of WOTC relationship reflects approximately 25% of the debtors’ league game business revenue. The plaintiff also discussed delaying the AET APA transaction for one week to allow the debtor to seek approval for a decrease in the purchase price. Aent also raised the fact that after the petition, the debtor’s tax payable increased by about $16 million and asked the debtor’s plans for payments to these increased accounts and how the debtor intends to pay the debtor. As the debtor said at the top of the phone, they were not ready for meaningful discussions, and the parties agreed to reconvene at 3:30 p.m. that day.
At 12:17 pm, the debtor informed them by email that they would be ready by 5:30 pm 3:30 pm, and the debtor said they were still not ready for discussion but agreed to the discussion at 7:00 pm after Aent approval. At 6:56 p.m., the debtor’s lawyer canceled the upcoming meeting, allegedly due to conflicts of irrelevant matters.
At 8:30 pm, Aent’s attorneys issued a “Notice of Major Adverse Changes” in which, one explained, the recent revelation about WOTC’s loss of revenue was a serious loss, which would have a significant adverse impact on the debtor’s financial performance and operational feasibility. It is estimated that the termination of the distribution agreement will result in about 25% of the debtors’ league game business revenue, or $39.88 million of $161.3 million, fundamentally changing the debtor’s economic forecast and ability to maintain its business. eent requested immediate discussion on the impact on the APA’s closure and necessary amendments. Aent also noted that there is no resolution on the purchase price adjustment and the plaintiff will terminate the APA at 4:00 pm on April 24, 2025
Given yesterday’s additional bombshell, Diamond failed to file monthly operational reports in January, February and March, and the court recommended diamond liquidation (Chapter 7) or dismissing bankruptcy, it’s hard to see a rough situation here.
In all my coverage of Diamond’s bankruptcy, I always keep in mind the real human involvement. We all have friends working at Diamonds and over the years they have done a lot of good things for the industry, like Free Comic Day.
So, reading these allegations – Diamond is increasingly desperate to hide the truth about its assets, and the effort to keep morale in the face of actual contract details, rejecting an attempt to “conduct meaningful discussions.” On the other hand, the reason you hire bankruptcy experts like Raymond James and Getzler Henrich is that neutral third parties will run correctly, rather than allegedly covering up key financial details.
This also raises Chipper’s questioning: “Diamond Comics distributors have revealed alternative, unusually well-known buyers, and they are happy to work with us.”
While unnamed buyers are almost certainly common, you have to doubt whether they know the status of the WOTC/Diamond relationship… or other revelations that have not been disclosed yet.
As we mentioned above, throw the bones at the end of the filing:
Although being forced to terminate the AENT APA because of Defendants’ unwillingness to engage in meaningful discussions regarding a downward adjustment of the purchase price of the Debtors’ assets or agree to a one-week extension of the closing date, AENT remains ready, willing, and able to close the purchase of the Debtors’ assets at a reduced valuation, as agreed by AENT and the Debtors, to reflect the loss of revenue represented by the terminated WOTC Distribution Agreement.
Diamonds still have value, just so much we imagined.
After all these revelations, I completed any guesses about this situation. I’m just going to grab the popcorn and follow along with everyone else.
