SAN FRANCISCO, Sept 24 — Butterfly Labs, a company that allegedly charged customers thousands of dollars for computers it said would enable them to accrue Bitcoin virtual currency, was shut down by a US court, according to regulators.
Butterfly Labs deceptively marketed specialised computers designed to produce Bitcoins and delivered defective machines or never provided them at all, the Federal Trade Commission said in a statement today.
“We often see that when a new and little-understood opportunity like Bitcoin presents itself, scammers will find ways to capitalise on the public’s excitement and interest,” said Jessica Rich, director of the agency’s bureau of consumer protection. “We look forward to putting the company’s ill-gotten gains back in the hands of consumers.”
The FTC last week sued BF Labs Inc, the company that does business as Butterfly Labs, in Kansas City, Missouri, federal court. The company promoted the computers, which they called BitForce, as cutting-edge, according to the agency. They ranged in price from US$149 to US$29,899 (RM483 to RM97,400). As of September 2013, more than 20,000 consumers didn’t receive the computers they had purchased, the FTC said.
Even where Butterfly Labs did deliver a Bitcoin-mining computer to a consumer, the FTC said the computers were useless for their intended purpose.
Butterfly Labs called the FTC action “heavy-handed” and said the dispute should be resolved in court.
“It appears the FTC has decided to go to war on Bitcoin overall and is starting with Butterfly Labs,” the company said in a statement. “We are not going away without a fight.”
The FTC said it obtained an order that blocks the company from operating and freezes its assets. The document, labeled as filed under seal, couldn’t be immediately confirmed in court records. A hearing is scheduled for September 29 before US District Judge Brian C. Wimes in Kansas City. — Bloomberg
