Ye Faces Debt Issues Incurred by Yeezy Apparel in California

Government records show that rapper Ye faces six-figure debt issues from his famous global Nike-partnered Yeezy brand.

The artist always kept the public versed with several of his financial struggles. For instance, he revealed he owed the bank a total of $53 million before he became a billionaire. Moreover, banks froze some of his accounts on the grounds of tax debt.

The recent issue comes from the state of California. According to tax collectors, his Yeezy Apparel, owned and managed by Ye, incurred around $600,000 in unpaid tax debt. The tax department sent him three separate notices. However, he still needs to answer these.

These issues come after the public criticized Ye for his antisemitic comments. For example, Nike recently abandoned its partnership with Ye. Months prior, Adidas also cut ties with Ye, leading Forbes to remove Ye from its billionaire’s list. Tax experts add that the debt might mean that Ye and his companies face deeper systemic problems.

“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.

Yeezy Apparel in California started its operations starting 2017. According to the state’s business records, the company performed well and participated actively in the state’s economy.

In addition, Yeezy formed a large part of Ye’s business presence across the globe. Ye partnered with several big brands like Nike, Adidas, and Gap through the brand. And all of these companies cut ties with Ye after his antisemitic comments.

The liens issued to Ye

Experts found that the lien issued to Yeezy Apparel in California might connect with other issues faced by other businesses owned by Ye. For example, the government of California imposed liens on three of the rapper’s businesses, including one for a charity dating back to 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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The future of the Yeezy brand

After Adidas withdrew its partnership with Ye, Forbes expected the singer to lose significant revenue. However, experts add that the future of the Yeezy brand remains unclear. But Adidas said they would continue to sell the Yeezy designs using a different branding.

“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 the 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 and antisemitism

Adidas reacted negatively after the artist made antisemitic comments in public. As a result, they terminated their contract with Ye. They explained that it would lead to significant losses in the company. However, the business firmly held to its resolve in not tolerating the kind of behavior Ye exhibited.

“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.