The story of Phinel's Folly is that of a Corellian gun runner named Phinel. During a routine inspection by Tresarian customs agents, Phinel was intercepted while landing on a small rocky moon in the Auril Sector. The agents inspected his YV-666, and found that it was carrying hundreds of crates of illegal Nighstinger blaster rifles. To buy his freedom, Phinel made a deal with the customs agents, promising to continue setting-up the deal with the buyer, so his accomplices could be searched as well and the credits confiscated. But Phinel's greed got the better of him, and he attempted to betray his bargain with the authorities. The agents, sensing a deception, had placed a hidden tracking device on Phinel's YV, and the smuggler's plot was thwarted on the moon, which became known as "Phinel's Folly" ever after.

The moon itself is small, leading to a debate over the proper categorization: moon, dwarf planet, or asteroid. Some believe it is a large comet that was captured by the star sometime in the distant past. With no space stations in orbit around it, the moon's surface has been highly developed. Trading posts, warehouses, fuel depots, a starport, air reclamation centers, and even some small factories dot the surface, with housing facilities filling the land in between.