Psystar files for bankruptcy protection

Tue, May 26, 2009


Unauthorized Apple clone maker Psystar, which is currently in the midst of litigation with Apple, filed for Chapter 11 bankruptcy protection late last week.  According to papers filed with the court, Psystar is in the hole for more than $250,000, most of which is owed to shipping and credit card processing companies.

As part of its bankruptcy filing, Psystar blamed a struggling economy for their financial predicament.

Debtor sales have been greatly affected by the decrease in consumer spending. The financial crisis has also caused creditors to tighten up their terms and become more demanding for immediate payment

While full details of Psystar’s financials remain unknown, a recent motion filed by Apple suggests that Psytar’s financial record keeping left much to be desired.  As part of its ongoing litigation with Apple, Psystar was obligated to hand over documents pertaining to revenues, profits, purchase receipts, and invoices.  Psystar, however, contended that it wasn’t in possession of the documents sought by Apple, and that some of the mentioned financial records didn’t even exist.  In a somewhat dubious explanation to the court, Psystar wrote that it had lost pertinent financial documents in a move, and that they didn’t even keep basic financial records such as profit/loss statements because they were a relatively new company.

Apple had also complained that during his deposition, Psystar president Rudy Pedraza was curiously unable to recall even basic financial information about the company he’s in charge of running.  Consequently, Apple requested that Psystar make available for deposition, at their own expense, an individual who could answer those questions.

Of course, there’s also the possibility that Psystar is full of it, and that they  were purposefully lazy in keeping  the proper financial documentation as is required by law.

What Psystar might have been trying to hide

In a motion filed last December, Apple noted that it had reason to believe that “persons other than Psystar” were involved in running Psystar’s business.  Obviously, these mystery men (or perhaps corporation) Apple refers to are unknown, and Apple subsequently refers to them as “John Does 1 through 10.”   In other words, Apple believed that there were some big purse strings working behind the scenes at Psystar, and it wanted to find out exactly who or what it is.

An obvious and substantial portion of Psystar’s financial information relates to “investors, lenders, and other sources of financial support”, and if Psystar disclosed this information to Apple, it would subsequently expose and identify the John Does Apple believes exists.

This is admittedly conspiratorial, and it could very well be the case that Psystar is simply run by a bunch of bums who simply ran out of money because they had no idea how to efficiently run a business.

Either way, once details emerge from Psystars bankruptcy proceedings, we’ll be able to find out who, if anyone, was bankrolling the Psystar operation.  According to a filing from Psystar, it currently has somewhere between 1 and 49 creditors, and owes over $100,000 in credit card processing fees alone.

What happens to the current litigation

For the time being, the ongoing litigation between Psystar and Apple will be put on hold while the court sorts through Psystar’s bankruptcy filing.  Once the case resumes, though, Psystar might not be able to afford to pay the premium lawfirm it hired to argue its case.  People at Apple must be smiling.



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