The Orange County Register has reported that the Lake Forest-based company Power Balance LLC, amidst lawsuits claiming that their performance bracelets failed to perform, has filed for bankruptcy protection.
The rubber bracelets, embedded with a hologram device, are the subject of lawsuits claiming that the company was misleading in its advertising both stateside and abroad.
Chris Thonis, spokesman for Power Balance, stated that the company will continue operations during its reorganization. Thonis also said that one of the lawsuits, reported by one media outlet as settled for $57.4 million, was actually settled for $1 million.
According to court papers Power Balance assets are listed as less than $10 million and debts range between $10 million and $50 million. The largest creditors include the Los Angeles Kings Hockey Club for $250,491, Sacramento Kings basketball team for $100,000, entities representing a prominent Los Angeles Lakers player for $400,000, a pro skateboarder for $25,000 and a Clippers player for $20,000.
Power Balance linked their bracelets to many professional athletes.
The company released a statement that read: "Due to the unauthorized marketing tactics of an independent distributor in Australia and the proliferation of counterfeit operations of which we obviously have no control, Power Balance has become the target of number of class action lawsuits. Although we find the lawsuits to be baseless, they have cost the company millions of dollars in legal fees and continue to threaten the core business. The company has gone through extensive efforts to ensure that its marketing messages are supportable and compliant with local laws. However, lawsuits continue to surface against Power Balance at a tremendous cost to the organization. Power Balance cannot wait for these issues to resolve themselves or to go away. After many months of extensive legal analysis and exhaustive research, the company has determined that the only viable option at this time is to seek assistance available to us through bankruptcy laws and the protection of the courts."
Power Balance, incorporated in Delaware, was founded in 2007 by T.R. and J.R. In an interview in 2010, the pair said that their $30 bracelets allow wearers to achieve the best results by using Eastern philosophy. T.R. allegedly said, "It absolutely is never to be a substitute for hard work. It's about making you the best you can be."
Many professional athletes, including basketball players, soccer players and football players, were publicly seen sporting the bracelet.
But, by late last year, the company felt the need to post a disclaimer on their former Australian website that said, "In our advertising we stated that Power Balance wristbands improved your strength, balance and flexibility. We admit that there is no credible scientific evidence that supports our claims and therefore we engaged in misleading conduct in breach of s52 of the Trade Practices Act 1974."
Regulators in Australia were reportedly uncomfortable with the promises made by Power Balance.
If you are headed to bankruptcy, contact a bankruptcy attorney to best suit your needs as soon as possible.