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Bitcoin Mining Firm Butterfly Labs Agrees To Settle US FTC Charges

The US Federal Trade Commission (FTC) on Thursday announced that Butterfly Labs, a bitcoin mining hardware company, and two of its operators – part-owner and vice president of product development, Sonny Vleisides, and general manager, Darla Drake – have agreed to settle Commission’s charges about making misleading claims about their products.

The FTC’s complaint against the company and its corporate officers alleged that Butterfly Labs deceived several customers about the “availability, profitability, and newness” of machines designed to mine Bitcoin. The company was also accused of unfairly keeping consumers’ up-front payments despite failing to deliver the machines as promised. According to the FTC’s complaint, as of September 2013, over 20,000 consumers had not received the computers they had purchased.

“Even in the fast-moving world of virtual currencies like Bitcoin, companies can’t deceive people about their products,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “These settlements will prevent the defendants from misleading consumers.”

Under the terms of the settlements, the defendants will be prohibited from misrepresenting its products or services to the consumers, and the delivery timing of the same. In addition, the company and Vleisides will also be prohibited from taking up-front payments for Bitcoin machines and other products used to mine for any virtual currency unless those products are available and will be delivered within 30 days. If the company fails to deliver the product within 30 days, a refund must be provided.

The orders also include partially suspended monetary judgments:

  • Against Butterfly Labs and Vleisides, the judgment is $38,615,161, which will be suspended upon Butterfly Labs’ payment of $15,000, and Vleisides’ payment of $4,000.
  • Against Drake, the judgment is $135,878, which will be suspended once she surrenders the cash value of all Bitcoins she obtained using company machines.

Butterfly Labs told CoinDesk that it continues to dispute the FTC's suit and is currently focusing on processing customer refunds.

“BFL continues to believe that the FTC case had no merit, but agreed to settle for $15,000 to avoid ongoing litigation expenses and conserve remaining assets for payment of refunds to consumers," the firm said.

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