Government documents reveal that rapper Ye suffers six-figure debt problems related to his well-known Yeezy fashion brand.
A number of his financial troubles were always kept public knowledge by the artist. He disclosed that, before becoming a millionaire, he owed the bank $53 million. Additionally, some of his accounts were frozen by banks due to tax arrears. California is where the current problem originated.
According to tax officials, Ye, the owner and manager of Yeezy Apparel, allegedly owed over $600,000 in back taxes. He received three notifications in all from the tax department. He still has to respond to these, though.
After Ye’s antisemitic remarks received criticism from the general public, several problems arose. Consider the recent dissolution of Nike’s alliance with Ye. Ye was removed from Forbes’ list of the world’s wealthiest people when Adidas and another company severed their relations with him. According to tax specialists, the debt may indicate that Ye and his businesses are dealing with more serious structural issues.
“Multiple California tax liens, adding up to $600,000. That’s certainly a sign of either extreme incompetence or extreme cash problems. That is kind of an Amber Alert for the enterprise’s financial health,” said Professor Edward McCaffery from the USC Gould School of Law.
2017 saw the beginning of business for Yeezy Apparel in California. According to the state’s corporate records, the company operated effectively and contributed actively to the state’s economy. Yeezy also played a significant role in Ye’s global corporate footprint. Through the brand, Ye collaborated with several significant companies, including Nike, Adidas, and Gap. And following Ye’s anti-Semitic remarks, all of these businesses severed their connections with him.
The government liens to Ye
Yeezy Apparel’s California lien may be connected to other troubles that other Ye-owned companies are having, according to experts.
For instance, three of the rapper’s businesses were struck with liens by the state of California, one of which was for a charity from 2012.
“The state is subject to some criticism for sitting on this when there is a going business from which they could collect. However, tax lien indicates that the state maintains that a debt is owing to the state,” said Lynn LoPucki, a University of Florida law professor.
“Those would be unemployment insurance and state disability insurance taxes, things like that,” added Kirk Stark from the UCLA School of Law.
“Consistently ignoring communications from the EDD would eventually be a basis for the department to just say, ‘OK, well then, you know, we’re going to file this lien, and you know, set this in motion,'” Stark added.
“They’ve gotten pretty serious before a lien is usually imposed. This is not the first step of a tax enforcement agency,” explained David Gamage, another law professor from Indiana University Bloomington.
“If you’re screwing up on this, you’ve got bigger problems. And there are probably other things you’re not paying for. But on the other hand, it could be consistent with just kind of a bare-bones operation that’s a little sloppy,” added McCaffery.
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Uncertain about the brand’s future
Forbes predicted that Ye would experience significant financial loss once Adidas ended its sponsorship. As a result, analysts suggest the Yeezy brand’s future remains unknown.
Adidas, however, declared that they will keep promoting a different brand while still selling the Yeezy clothes.
“Let me be clear, we own all the IP, we own all the designs, we own all the versions and new colorways,” said Adidas CFO Harm Ohlmeyer.
“What he can use is what he has, you know, his trademarks. And any new designs or any new stuff that he comes up with. And I think that’s really where the brand has to go — in my opinion, they’d have to create new stuff,” said Zak Kurtz, Sneaker & Streetwear Legal Services CEO.
“It could align with a new licensee. Perhaps one that can offer the same type of products and services that Gap and Adidas did. Although it seems unlikely that any companies would be willing to take a risk on a volatile brand and designer such as Ye,” added Kenneth Anand, a writer and expert.
“Ye’s recent statements have hurt the Yeezy brand. Consumers are openly declaring that they will no longer support and wear Yeezy. And even if they have spent a considerable amount of money on the brand’s products,” he added.
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Ye facing criticisms
Following the artist’s public anti-Semitic remarks, Adidas took a critical stance. The company, therefore, broke its agreement with Ye. They described how it would cause the business to suffer huge losses.
Nevertheless, the company remained adamant about not allowing Ye’s actions and remained committed to that stance.
“Ye’s recent comments and actions have been unacceptable, hateful and dangerous. And they violate the company’s values of diversity and inclusion, mutual respect and fairness,” said Adidas.
“After a thorough review, the company has decided to terminate the partnership with Ye immediately. And end production of Yeezy branded products and stop all payments to Ye and his companies. Adidas will stop the Adidas Yeezy business with immediate effect,” it added.
“This is expected to have a short-term negative impact of up to €250 million on the company’s net income in 2022. Given the high seasonality of the fourth quarter. In addition, Adidas is the sole owner of all design rights to existing products and previous and new colorways under the partnership. More information will be given as part of the company’s upcoming Q3 earnings announcement on November 9, 2022,” the statement explained.
Photo Credit: Indigital
Source: NBC
