BF Labs, Inc.

The FTC alleged that BF Labs, trading as Butterfly Labs, took thousands of dollars up front for Bitcoin mining machines and then delivered them late enough to be useless, or not at all. The operators settled in 2016 under partially suspended judgments.

Resolved. Refunded, settled, ceased operating, or the claim did not hold up. Kept for the record.

Machines that arrived too late to mine anything

BF Labs, a Missouri company trading as Butterfly Labs, sold specialized computers built to mine Bitcoin. Consumers paid in full and up front, for machines ranging from $149 to $29,899 depending on their claimed computing power.

According to the FTC’s complaint, as of September 2013 more than 20,000 consumers had not received the computers they had purchased. The company nonetheless announced a new and more powerful machine, the Monarch, in August 2013 at $2,499 to $4,680, and had delivered few if any of those a year later.

Why the delay was the whole injury

Bitcoin mining gets harder over time by design, and each generation of mining hardware renders the last one close to obsolete. A machine delivered late is not merely late, it is incapable of earning what it was sold to earn. A company representative said the passage of time had rendered some of their machines as effective as a “room heater.”

The FTC also alleged the company sold Bitcoin “mining services” from December 2013, taking payment for computing time, and had provided no such services to consumers by August 2014.

The settlement

A federal court shut the operation down in September 2014 and froze its assets. In February 2016 the company, part owner Sonny Vleisides, and general manager Darla Drake settled. They are barred from misrepresenting whether a product can generate virtual currency, when it will arrive, and whether it is new or used, and from taking up front payment for mining hardware unless it ships within 30 days.

The judgment against Butterfly Labs and Vleisides was $38,615,161, suspended on payment of $15,000 by the company and $4,000 by Vleisides. The judgment against Drake was $135,878, suspended once she surrendered the cash value of the Bitcoins she obtained using company machines. The suspensions rest on the defendants’ inability to pay and become due if they misrepresented their finances.

What is not established

The 2016 orders are settlements, which resolve allegations without any admission or finding of wrongdoing.

Sources

Every claim above rests on one of these. Open them and check.

Right of reply

If you are named here and something is wrong, dispute this entry. There is no charge, the route never expires, and your response is published unedited.

Identity