Adidas alleges that Ye mishandled a marketing fund of over $100 million

On July 20, Bloomberg reported that Adidas is trying to force Kanye West (Ye) to return $75 million in marketing funds that he states”mishandled”.

The rapper, who changed his name from Kanye West and is now known as Ye, is engaged in a legal battle with Adidas.

According to court documents seen by an insider, they relate to a marketing fund worth $100 million a year. Adidas claims that $75 million was paid into Yeezy’s two bank accounts, but that Ye and his company Yeezy LLC argue “mishandled virtually all of the marketing funds.”

The contract signed by both parties, which was viewed by the insider, stated that “marketing funds must not be ‘commingled’ and that Yeezy must repay Adidas if the funds were used inappropriately. If the expenses were used inappropriately, as Adidas claims, Yeezy would be subject to reimbursement to Adidas.

In a 2020 interview on Nick Cannon’s podcast, Ye said that he spent $50 million of Yeezy marketing funds on Sunday Service, a gospel choir tour that performed at Coachella, Howard University, Jamaica, and at home in California and Wyoming. However, no statement was made as to whether this funding came from Adidas.

According to the shoemaker, the contract between Adidas and Ye is documented in a 53-page licensing and endorsement agreement signed in May 2016. Additionally, a series of amendments, letter agreements, and payment confirmations were later incorporated into the deal. The agreement comprises confidentiality provisions aimed at safeguarding the details of the agreement and the Yeezy business. Notably, one of these provisions stipulates that Ye’s company must return any marketing funds received from Adidas in the previous year if they were unused or misused.

Ye’s business collected royalties from every pair of shoes sold, making up the bulk of his payouts, which surpassed $200 million in 2020. Alongside the royalties, he received a marketing fee to promote the shoes – $51 million that year, or about 3 percent of net sales, as stated in the cash flow document prepared by UBS and reviewed by Bloomberg News.

Adidas is seeking the return of $75 million in funds, minus the amount Ye can show was used for valid marketing purposes, and unspecified monetary damages.

Ye’s partnership with Adidas collapsed in October after Ye accused the executives of a series of anti-Semitic rants last year. Adidas announced that $1.3 billion in Ye shares remained on hand.

In May of this year, Adidas announced that it would sell $1.3 billion in unsold Yeezys and donate the profits to organizations representing those who “were hurt” by Ye’s anti-Semitic comments. The company is also trying to recoup some of its earnings by donating some of the proceeds to charity. Still, it appears that the company may be facing its first operating loss since the early 1990s.

Adding to the predicament, in April, shareholders filed a lawsuit against Adidas in Oregon. The suit claimed that the former management neglected to disclose the problems between the company and Ye, and sought representation for a broader group of investors.

US District Judge Valerie Caproni at the hearing in Manhattan ordered both sides to reveal previously blacked-out marketing-related payments from the more than 450 pages of filings in the case, based on court disclosures. The dispute between the two sides has now returned to private arbitration.

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