Beneath the very public collapse of Adidas’ multibillion-dollar sneaker deal with Ye is a private legal battle over a $100 million-a-year marketing fund.
Bits and pieces of the conflict have also been seeping out in legal filings, including one in which Adidas alleges that the hiphop artist formerly known as Kanye West and his fashion brand Yeezy LLC “mishandled virtually all of the marketing funds” — including by deploying them for unauthorized purposes.
And then one did. The lawyers, who didn’t notice, went on to discuss the previously undisclosed marketing fund that Adidas executives had put in place. Adidas claims that last year it paid $50 million into a Yeezy bank account in Wyoming, where the rapper/designer used to live, and $25 million into Yeezy’s JPMorgan Chase account in New York, all to be put in a special pot for marketing.
The dispute became public when Adidas went to federal court in New York to try to freeze the $75 million to prevent Ye from dissipating it or moving it out of reach. To make matters worse, shareholders filed a suit against Adidas in Oregon in April, alleging that former management failed to disclose issues between the company and Ye, and asking to represent a larger class of investors.
Under the terms of their deal, Ye’s business collected royalties from every pair of shoes sold, making up the bulk of his payouts, which surpassed $200 million in 2020, according to a cash flow document prepared by UBS and reviewed by Bloomberg News.