Butterfly Labs Is In The FTC's Crosshairs - From The CoinFront

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Late last week, rumours began to spread that Butterfly Labs, a Bitcoin mining equipment manufacturer, was raided by the US Marshal in relation to fraudulent activities.

While no concrete evidence has emerged in relation to the raid, it turns out that the Federal Trade Commission has actually launched a case against them.

Federal Trade Commission v. BF Labs, Inc

In a document related to the case filed September 15th, the FTC alleges that in Butterfly Labs’ business practices, “consumers who have purchased the [Bitcoin mining] machines or services cannot use them to generate Bitcoins because Defendants never provide them with the machines or services.”

And “in numerous other instances, even where Defendants have provided the machines, they have done so after significant delays, resulting in machines that are obsolete or have depreciated significantly toward obsolescence, or the machines have arrived damaged or defective. As a result, consumers have not been able to use the machines to generate a profit or return on investment. Defendants also frequently have not provided refunds to consumers who have not received the machines or who have received the machines after a substantial delay.”

The case alleges that although Butterfly Labs has been selling their Monarch mining machines since August 2013, not a single customer who ordered such a machine has received one, despite Butterfly Labs’ claim that the machines would ship by the end of 2013.

Essentially, the FTC claims that Butterfly Labs represented itself falsely, and that it misled consumers on what they were ordering.

Butterfly Labs’ Legal Troubles

This isn’t the first time Butterfly Labs has ended up in legal trouble. A class action lawsuit filed earlier this year by two Americans made similar claims as the FTC’s case.

At this point, Butterfly Labs is almost universally reviled by the Bitcoin community, and it will take a tremendous amount of effort to rebuild their reputation. At this point, their brand integrity is likely irreparably damaged.

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Butterfly Labs Is In The FTC's Crosshairs