The rumours are true. Butterfly Labs has been shut down by the FTC.
Information came to light yesterday about the FTC’s case against Butterfly Labs, which alleged that the company had falsely represented itself.
Namely, they took preorders for newly promised mining hardware which they were either unable or unwilling to deliver on. Their Monarch mining machines, which promised an incredibly fast hash rate, had been preordered by a number of bitcoiners since August of last year, and to this day not a single Monarch has been delivered.
Those affected customers complained to the FTC, which led to their case against Butterfly Labs, and the state which the company now finds itself today.
The Level Of Butterfly Labs’ Deception
It’s been reported that up to 20,000 users had placed preorders with Butterfly Labs which hadn’t been fulfilled.
When the FTC was asked on their Twitter account how much money Butterfly Labs took from customers using the hashtag #AskFTC, they responded with the following:
A12 At least $20 million, and potentially up to $50 million. #AskFTC
— FTC (@FTC) September 23, 2014
While they did deliver on some of their machines, the time it took to deliver them meant that realizing a return on the consumer’s investment was nearly impossible. According to a statement from the FTC, one Butterfly Labs representative claimed that the passage of time would render these devices “as effective as a room heater.”
Butterfly Labs Responds
Butterfly Labs made a post on the BitcoinTalk forum in response to the FTC’s actions against them.
They accuse the FTC of “heavy-handed actions” and a “rush to judgment”, claiming their actions “are negatively impacting our thousands of customers and our dozens of employees.”
Further, they accuse the FTC of deciding to “go to war on bitcoin overall, and is starting with Butterfly Labs. Butterfly Labs is being portrayed by the FTC as a bogus and fake company. To the contrary, Butterfly Labs is very real.”
The community reacted overwhelmingly negatively to this statement, however. One user pointed out that “far from being a rush to (sic) judgement it’s taken way too long.”
Moving Forward
What happens to those who sent their money to Butterfly Labs without receiving any product?
A statement from the FTC shows that their focus will be on making these scam victims whole again.
“We often see that when a new and little-understood opportunity like Bitcoin presents itself, scammers will find ways to capitalize on the public’s excitement and interest,” said Jessica Rich, director of the FTC’s Bureau of Consumer Protection. “We’re pleased the court granted our request to halt this operation, and we look forward to putting the company’s ill-gotten gains back in the hands of consumers.”
Butterfly Labs Shut Down By The FTC After Taking Millions Of Dollars Without Delivery
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