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Bitcoin Company Shutdown for Failing to Deliver Bitcoin Mining Computers

09.30.14

Based on the FTC’s request, a judge enjoined Butterfly Labs from marketing “BitForce” which were “specialized computers designed to produce Bitcoins, a payment system sometimes referred to as “virtual currency.”” According to the FTC’s complaint,” as of September 2013, more than 20,000 consumers had not received the computers they had purchased.” So on September 18, 2014, US District Judge Brian Wimes (Western District of Missouri) in the case of FTC v. BF Labs, Inc. et al issued an Ex Parte Order enjoined the defendants “from misrepresenting, expressly or by implication, directly or indirectly:”

1. The amount of Bitcoins or any other virtual currencies Defendants’ products or services will generate; or

2. When products or services will be delivered to consumers.

The Ex Parte Order included a repatriation of foreign assets that the defendants had 5 business days to provide the Temporary Receiver “full accounting of all assets, accounts, funds, and documents outside of the territory of the United States that are held either”:

(1) by them;

(2) for their benefit;

(3) in trust by or for them, individually or jointly; or

(4) under their direct or indirect control, individually or jointly.

There is another side to this story as eWeek reported:

According to Butterfly Labs, the company shipped more than $33 million worth of products to customers. The Butterfly Labs Bitcoin miner technology was sold in multiple places, including popular online retailer TigerDirect.com. TigerDirect currently lists the Butterfly Labs Bitcoin miner as being out of stock.

Bitcoin headlines will continue because as the FTC pointed out in its news release “We often see 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.”

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