Celebrity investors—and celebrity fans—are no insulation from bankruptcy.
Power Balance, a nearly five-year-old California startup that sold "performance bracelets" that claimed to "improve and enhance people's lives" has filed for Chapter 11 bankruptcy. Wearers of the $30 silicone bracelets with "hologram technology" included David Beckham, Robert DeNiro, P Diddy, Khloe Kardashian, Shaquille O'Neal—even Her Royal Highness Catherine Middleton, the Duchess of Cambridge.
The Laguna Niguel company's investors included Lamar Odom (pictured, wearing the bracelet) of the Los Angeles Lakers, a.k.a. Mr. Khloe Kardashian.
Power Balance suffered a net loss of more than $9 million in the 10 months ending in October after earning an $11.7 million profit last year, according to documents filed in federal court.
The company sold more than 2.5 million bracelets worldwide, but has lost customers around the world after a class action lawsuit seeking $5 million in damages was filed in January originating from "inappropriate marketing claims" from an Australian distributor. The suit is one of at least 10 filed in the U.S.
Advertisements claimed that the bracelets improved balance, strength and flexibility—benefits that the Australian Competition and Consumer Commission challenged.
"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," Power Balance said.
It offered a refund to consumers who felt misled.
Power Balance acknowledged in a statement that it was forced to file for bankruptcy because of lawsuits.
Among the company's biggest creditors: Kobe Bryant, who won't be receiving the $400,000 he had coming from an endorsement deal. Other sports-related claims come from pro skateboarder Ryan Sheckler (owed $25,000) and Clippers center Blake Griffin ($20,000).
The company was founded by Troy Rodarmel and his younger brother Josh Rodarmel in 2007. Both are former college football players, Josh at Yale and Troy at Cal Baptist University. The pair grew up in what Josh Rodarmel described as a very holistic California family, the type of family that visited the chiropractor a couple of times a month. Of starting the business, Josh Rodarmel said in a 2010 interview: "It started slow. We were involved in a few different businesses and didn’t know we would focus on this. It started to pick up momentum and we said, ‘hey we have to stop doing this other stuff and focus on one thing.’ If you try and catch two rabbits at once, they’ll both get away."
The company Tweeted: "Power Balance is not going out of business."
In fact, the company is launching something it calls Performance Mouth Gear, which incorporates “innovative technology to properly align the jaw and the spine through optimal positioning of the bite.”
Image credit: powerbalancebracelet.co