The Federal Trade Commission Files Case against Butterfly Labs, Gets it shut down


Bitcoin Mining Machine

The Federal Trade Commission filed a civil lawsuit against Butterfly Labs (BFL), an embattled Kansas-based Bitcoin miner manufacturer and got the court order that asks the company to shut its operations. The FTC in the case had alleged that the company engaged in fraudulent and deceptive practices.

Now, at the request of the Federal Trade Commission, a federal court has shut down Butterfly Labs, which according to the FTC deceptively marketed specialized computers designed to produce Bitcoins, a payment system sometimes referred to as “virtual currency.” The FTC alleged that Butterfly Labs charged consumers thousands of dollars for its Bitcoin computers.

However, failed to provide the computers until they were practically useless, or in many cases, did not provide the computers at all. Also, federal authorities believe that the three named members of the company’s board of directors e.g. Jody Drake (aka Darla Drake), Nasser Ghoseiri, and Sonny Vleisides spent millions of dollars of corporate revenue on all kinds of things.

A Lot of Complaints Were Being Received by the Affected Customers

The FTC said that the above mentioned three people spent a lot of money on saunas and guns, while ignoring many customer orders that went unfulfilled or were significantly delayed. Though the case was filed in federal court last week in Missouri, it was unsealed late Monday that has exposed the practices from BFL.

The FTC alleges one corporate defendant and three individual defendants have taken in over $50 million by operating a scheme that required consumers to pre-pay for machines that would allow consumers to ‘mine’ for Bitcoins, a new virtual currency. It further reads that defendants either never delivered these machines or delivered them so late that they became obsolete.

Understanding the gravity of the problem the court granted the FTC’s request to put the company under a temporary receivership. Jessica Rich made it clear that her organization is pleased that the court granted request to halt this operation. She said that she looks forward to putting the company’s ill-gotten gains back in the hands of consumers.

Jessica Rich, director of the FTC’s Bureau of Consumer Protection, in a written statement said that more than often it is seen that when a new and little-understood opportunity like Bitcoin presents itself, scammers will find ways to capitalize on the public’s excitement and interest.

To contact the reporter of this story: Deepak Tiwari at