Bankrupt DSG Sues Sinclair, Alleging $1.5B Worth Of Fraud

It’s no secret that Diamond Sports Group is facing external and existential challenges, from ongoing churn in traditional pay TV to battles with creditors, leagues, and teams.

Now, add a major internal battle to the list.

The bankrupt Bally Sports parent has sued its own corporate parent, Sinclair Inc., alleging that more than $1.5 billion was illegally siphoned as DSG’s business deteriorated. The lawsuit, filed last month, has recently been unsealed as part of DSG’s ongoing bankruptcy case.

DSG claims that Sinclair used the company as a source of personal enrichment for several years as the entire regional sports network business fractured and DSG ultimately headed for bankruptcy earlier this year.

“Throughout this entire period of precipitous decline, Sinclair unrelentingly continued to carry out its plan to ‘milk’ Diamond for Sinclair’s own benefit and to extract whatever value it could salvage before Diamond’s inevitable bankruptcy,” DSG said in its filing.

“All of this was conceived of and implemented while Diamond’s business was, as Sinclair officers knew or should have known, careening toward bankruptcy, and it continued after Diamond was unquestionably insolvent,” the suit continues.

DSG remains in a time crunch to determine its future. A bankruptcy reorganization plan is due by Sept. 30 — and to complete that, the company must decide which of its 27 total NBA and NHL team media rights it will keep. The decision will require meaningful progress on distribution renewal negotiations with Comcast, DirecTV, and Spectrum.

On Thursday, DSG received its requested judicial mediators to help resolve these issues.

Sinclair VP Chris King said the company “firmly believes that it has meritorious defenses to the allegations in the Diamond lawsuit, and we plan to vigorously defend against them.”