Long story short:
BESM made a fair amount of money and McKinnon got very ambitious with his plans for the company. He started soliciting work (art and text) from many, many big names in the industry at the time (Bruce Baugh, Rebecca Borgstrom and many others) for Silver Age Sentinels and Ex Machina and other games lines, as well as entering into exclusive licencing agreements for the ASOIAF (Game of Thrones) RPG conversion and new editions of Amber and Nobilis, among others. He also entered into distribution agreements with several small game companies (which were really one or two-person shops) and took money from them to distribute their books under the GoO banner.
People handed in their work and didn't get paid. People paid for preorders and no product was forthcoming. Questions started being asked. McKinnon then simply vanished off the Internet. He didn't even give his contracted contributors a 'sorry' email. He just ghosted. The freelancers looked into legal options, but given the relatively small amounts (10k here, 15k there, 30 elsewhere), they were told that the cost of pursuing their money would be more than they'd lost already, with no guarantee that he'd have the assets to pay up when they won.)
The only person who got any traction at all was George RR Martin, who was starting to bask in that filthy fantasy doorstop money was willing to take a loss to get his IP back. He did, along with all the remaining stock of the ASOIAF hardbacks, which he sold on his own website for several years.
On top of that there were the customers who didn't get their preordered and paid content. Since at some point after going radio silent, McKinnon sold the rights to BESM to White Wolf, they made good on HIS back orders of that product and fulfilled printing and shipping on 3rd edition BESM.
The freelancers and 'partners' never saw a dime of that money and it drove a few of them into deeply unpleasant financial straits. Some people were stiffed for literally months of full-time work.
And now the dude is back and his position is that that his old company owned them that money but it's gone (he has not clarified if he actually declared bankruptcy and I am definitely not a lawyer so I'm not even going to pretend to know how that works) so he's not liable. Tough titty, basically.
But GoO and this new company were/are one-man shops with McKinnon as the only company officer. Morally, if not legally (and maybe legally, again, I'm not a lawyer so I have no idea), he's responsible for a truly huge amount of financial loss. Last I heard, between the stiffed freelancers, the missed licencing opportunities and the publishing fees he took knowing he couldn't fulfill his responsibilities, the amount lost was pushing up into the high hundreds of thousands or more.
TL;DR version: Dude is a scamming asshole. His business didn't just fold. He bilked a lot of people out of a lot of cash knowing he couldn't make good on his contracts before it folded.
