Months after their partnership disintegrated due to antisemitic comments made by Kanye West, German sportswear giant Adidas is embroiled in a fierce legal battle with the rapper, now known as Ye, over a disputed $75 million in mishandled marketing funds.
The dispute is currently being conducted in arbitration, with Adidas seeking to retrieve the $75-million marketing payment it alleges was mishandled by Ye’s Yeezy brand.
According to Adidas, the marketing funds were meant to be kept separate and used only for authorized purposes, but they were instead commingled and spent inappropriately.
The sportswear company claims that $75 million was transferred to two of Yeezy and Kanye West’s bank accounts, but both parties “mishandled virtually all of the marketing funds.” A signed contract between Adidas and Yeezy stipulated that any misuse of the funds would require repayment to Adidas.
In an attempt to secure the $75-million fund, Adidas launched a lawsuit against Ye’s Yeezy brand. However, the court bid was denied, with U.S. District Judge Valerie Caproni stating that the evidence presented was insufficient to support their claims. Despite the setback, the court decision indicates that Adidas will likely recover the funds in arbitration.
Following the denial of the lawsuit, Adidas and Yeezy agreed to proceed with private arbitration to resolve their financial dispute.
In arbitration, Adidas is expected to argue that West’s “offensive conduct” was the primary reason for the dissolution of their long-standing partnership.
The fallout from the severed collaboration has had substantial financial impacts on both parties. West’s net worth has plummeted by $1.6 billion since the split, indicating the financial significance of his relationship with Adidas.
On the other hand, Adidas reported a net loss of €39 million ($43 million) in the first quarter of its fiscal year 2023, compared to a profit of €482 million ($531.2 million) recorded during the same period the previous year.
The company’s operating profit has dropped significantly, falling by more than 85 percent to €60 million ($66.2 million). The loss of revenue from the popular Yeezy sneaker line has impacted sales across North America, Greater China, and EMEA regions.
Despite the setbacks, Adidas CEO Bjorn Gulden remains optimistic about the brand’s future, referring to 2023 as a “transition year” for the company.
