Customers File Class-Action Lawsuit Against Butterfly Labs

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Missouri-based Wood Law Firm announced today that customers from across the United States have come together and filed a class-action lawsuit in the United State District Court for the District of Kansas which challenges both the sales and advertising practices of Butterfly Labs, a bitcoin mining hardware company based in Kansas.

The lawsuit seeks to recover pre-order payments made for bitcoin miners that either did not fit the description of what was originally stated or that were delivered far long after initially announced by the company.

Says Wood Law Firm in their announcement:

The lawsuit alleges Butterfly Labs required customers to pre-pay for orders of ASIC based Bitcoin mining hardware, and used portions of customer pre-payments to make loans to shareholders and purchase a house and automobile for a shareholder.

The trouble for customers is that by the time they received their equipment, it was not nearly as effective as it would have been if delivered on-time. This is attributed to the bitcoin technology’s mining difficulty increasing over time.

“Bitcoin is an exciting and promising new technology. Unfortunately this also makes it an attractive area for people running scams and frauds,” said Noah Wood, attorney at Wood Law Firm. “Stopping the bad actors and staying vigilant against consumer fraud is absolutely necessary for the successful development of the Bitcoin ecosystem.”

The complaint alleges that Butterfly Labs may have collected upwards of $25 million in pre-order payments, and used the equipment they manufactured for customers to mine bitcoins for themselves as part of the quality assurance testing program.

newsBTC has reached out to Butterfly Labs with request for comment but did not receive a response before publishing time. We will, of course, update accordingly should a response come in. Update: read the response here.

The case is Alexander et al. v. BF Labs, Inc., Case Number 2:14-CV-02159 (D. Kansas).

View a copy of the complaint filed on April 4th here.