Federal Trade Commission Civil Lawsuit Against Butterfly Labs

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The Federal Trade Commission recently filed civil lawsuit against Kansas-based Butterfly Labs for using “fraudulent” and “deceptive” practices against its customers.

The lawsuit was filed in the state of Missouri last week (on September 15th, to be precise), and names three of the company’s board members: Darla Drake (also known as Jody Drake), Nasser Ghoseiri, and Sonny Vleisides as defendants.

All of this stems from numerous complaints from the bitcoin community over unfulfilled or incredibly delayed orders. Often times, customers who received their delayed orders weren’t able to mine to their full potential due to increased block difficulty.

The complaint alleges:

[blockquote style=”2″]In numerous other instances, even where Defendants have provided the machines, they have done so after significant delays, resulting in machines that are obsolete or have depreciated significantly toward obsolescence, or the machines have arrived damaged or defective. As a result, consumers have not been able to use the machines to generate a profit or return on investment. Defendants also frequently have not provided refunds to consumers who have not received the machines or who have received the machines after a substantial delay.[/blockquote]

The lawsuit seeks a permanent injunction against against Butterfly Labs’ operations (in addition to a freezing of the company’s assets), in addition to court-determined relief for customers affected negatively by the actions carried out by Butterfly Labs.

FTC Lawsuit Butterfly Labs

Executives at the company have been accused of using customer funds for luxuries like guns and saunas, according to Ars Technica, and there was even rumors last week that the company’s headquarters were raided by Federal authorities (though these reports were never confirmed to have happened).

However you look at it, Butterfly Labs is facing some legal hurdles, and they’ll have to work hard to prove they acted with the best intentions when selling their products.

As of this writing, users are still able to order products from the Butterfly Labs website. Further developments forthcoming.