There was skepticism around Butterfly Labs from the beginning. Like most bitcoin companies, the Missouri-based startup sprang up out of nowhere. In late 2011, there were rumors of a leap in the technology for mining bitcoin. This technological leap had the potential to create massive profits for miners, as well as massive profits for those selling the new equipment to miners. It was the old selling-pickaxes-during-the-Gold-Rush strategy. Except Butterfly Labs added a twist. They didn't sell pickaxes.

They sold preorders for pickaxes. Butterfly Labs promised its technology could mine bitcoins 1,000 times faster Mining is an essential part of bitcoin. It rewards people for using their own computer power to maintain the network. Since Bitcoin has no central processing authority, it relies on the crowd to record transactions, check each others' math, and keep things secure. This is all built into the bitcoin software: miners don't have to actually do anything other than set up a computer and run the program.

Are you thinking about adding BitcoinDark (BTCD) to your cryptocurrency portfolio? View BTCD's latest price. (AntMiner), Butterfly Labs, Canaan (AvalonMiner). How much is 1 BitcoinDark (BTCD) in US Dollar (USD) online calculator. Current BTCD/USD exchange rate. Updated 1 minute ago.

Back in 2009 when bitcoin first appeared, anyone could run the mining software on an ordinary laptop and crank out 50 bitcoins in a day. As bitcoin became more popular, mining got more competitive. Soon miners started using more powerful graphics cards to mine bitcoin. Then serious miners began to devote racks of computers, like small personal data centers. Because there were so many miners chasing after the same bitcoins, mining got more and more expensive and the returns on investment got.

The bitcoin protocol is also designed to increase the difficulty of mining as time goes on, which further cut into miners' profits. In June of 2012, Butterfly Labs became one of the first pop-up companies to announce a breakthrough in mining technology: application-specific integrated circuits, or 'ASICs,' designed specifically to mine bitcoin 1,000 times faster.

At least two other companies cropped up, promising similar machines. Miners rushed to place preorders.

Some became loyal to certain sellers; others hedged their bets by ordering from all three. Whoever got their machines first would reap a windfall in mining profits before the rest of the mining world caught up. Butterfly Labs promised their customers that preorders would ship as soon as possible.

But they soon became evasive, issuing a series of shifting dates. At the time, the company told The Verge that the first ASICs would ship by December. Instead, by most accounts, the first shipments started trickling out in April. More than 20,000 customers who paid in full haven't received their orders While some customers received their ASICs — Wired magazine — many more started complaining about delayed shipments.

Some wondered if the products really existed. Others suspected Butterfly Labs had decided to use the machines to. Some forum users claimed to have received their orders; others accused them of being paid by Butterfly Labs.

It came out that one of the company's alleged cofounders was after pleading guilty to mail fraud in a lottery scam. Soon, Butterfly Labs was arguably the in the bitcoin world after Mt.

Gox, the bitcoin exchange that. But while Mt. Gox was merely incompetent, Butterfly Labs may have been malicious.

(Plus,.) Customers all over the world began. According to the FTC, more than 20,000 customers had received nothing by September 2013 — more than a year after customers' placed their first orders — despite paying upfront for products that ranged from $149 chips to $29,899 machines. That means customers were ripped off for at least $3 million, and that's a low, low estimate, since many customers reported buying the more expensive units, and more orders were placed after September 2013. Update: In total, Butterfly Labs collected between $20 million and $50 million in pre-orders,. Customers who did receive their orders found they were obsolete. A Butterfly Labs representative said the delayed machines were only useful as a 'room heater,'.

The machines were only useful as a 'room heater,' said one company rep Despite widespread failure to deliver, Butterfly Labs began offering new products and services in 2013: an even more powerful bitcoin miner and a remote mining service. The FTC says the company failed to deliver those, too.

Butterfly Labs did not immediately respond to a request for comment. In the past, the company has said delays were due to. The company has now been shut down pending a court case. 'We’re pleased the court granted our request to halt this operation, and we look 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, said in a statement today. UPDATE, 4:12PM: Butterfly Labs has released a statement: Butterfly Labs is disappointed in the heavy-handed actions of the Federal Trade Commission.

In a rush to judgment, the FTC has acted as judge, jury and executioner, contrary to our intended system of governmental checks and balances. The FTC's current actions are negatively impacting our thousands of customers and our dozens of employees. Their current media campaign should only further alarm a knowing citizenry and raise questions as to why the FTC wouldn't simply let this case play out through the judicial system. That is what Butterfly Labs intends to do.

It appears the FTC has decided to go to war on bitcoin overall, and is starting with Butterfly Labs. Butterfly Labs is being portrayed by the FTC as a bogus and fake company. To the contrary, Butterfly Labs is very real. As pointed out in court filings Butterfly Labs made last night, Butterfly Labs has shipped more than $33 million in products to customers and voluntarily granted refunds approximating $17 million to customers for cancelled orders. Butterfly Labs was literally is in the midst of shipping out completed products to fulfill the remaining millions of dollars of orders on our books and issuing requested refunds, when the FTC effectively closed the doors of Butterfly Labs without any chance to be heard in court. At this time, Butterfly Labs is cooperating fully with the Temporary Receiver appointed by the Court.

A hearing is set for September 29 and Butterfly Labs has asked the Court to allow it to present testimony from key witnesses for the company. Butterfly Labs intends to defend our business and our nascent and promising industry. The government wants to shut Butterfly Labs down, and we are not going away without a fight to vindicate bitcoin, our company, and our employees. Our continued focus is our customers and finding a way to continue to deliver products and processing refunds for those who have requested them. • Source: and.

Further ReadingThe Federal Trade Commission has against Butterfly Labs (BFL), an. The FTC alleges that the company engaged in fraudulent and deceptive practices. Federal authorities believe that the three named members of the company’s board of directors—Jody Drake (aka Darla Drake), Nasser Ghoseiri, and Sonny Vleisides—spent millions of dollars of corporate revenue on all kinds of things, including saunas and guns, while ignoring many customer orders that went unfulfilled or were significantly delayed. The case was filed in federal court last week in Missouri and unsealed late Monday, and it comes over a year after Ars first on the company and began its initial round of specialized computers designed to do nothing but mine for Bitcoin.

'The FTC alleges that 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,' the complaint states. 'Defendants either never delivered these machines or delivered them so late that they became obsolete.'

No one from BFL, including the three named defendants, responded to repeated requests for comment by phone, e-mail, and Skype. On the Bitcointalk.org forums stated that BFL’s offices in Leawood, Kansas (just outside Kansas City) were 'raided' by the United States Marshals Service (USMS) last Friday. Nikki Credic-Barrett, a spokeswoman for the USMS, told Ars on Monday that one of her colleagues from the Western District of Missouri, whom she declined to name, said that the USMS was 'present at this location on that day.'

'Anything concerned with what happened is under seal,' she said. 'That's the most he could tell me.'

UPDATE 11:17am CT: Helen Wong, an FTC attorney, told Ars that all three principals had been served with the lawsuit and that no arrests were made. The USMS, she said, was present to 'keep the peace.' Initially, she explained, the case was sealed to prevent BFL from moving money around (or, in government parlance, to prevent 'asset dissipation'). BFL is no longer in the hands of its principals but rather under a temporary court-appointed 'receiver,' a situation which will last until Monday, September 29. On that date, the judge can choose to extend the receivership or cancel it. 'The court granted the FTC's request to put the company under a temporary receivership,' Wong said.

'Basically everything is under the control of the receivership. The order allows us to locate documents and assets. The receiver has temporary custody of the company; everything is under his ownership until or unless the court decides otherwise.' Wong also noted that in this action—the FTC's first involving Bitcoin—seeks 'full consumer redress,' which, if successful, would result in refunds payable in US dollars. 'A stench coming from Butterfly Labs' For the past year, BFL insisted that mere manufacturing delays were to blame for the company's woes. However, suspicion of active fraud never died down—and only worsened after it came to light that Butterfly Labs' largest shareholder, Sonny Vleisides, had.

As a result, Vleisides’ probation—previously slated to end in September 2013—has been extended for another two years. How To Do Electra ECA Mining here. The judge who extended Vleisides’ probation, saying: Now, there is a stench coming from Butterfly Labs. It's a strong smell. It's not enough to send you to prison today, because, to be quite honest with you, if it was, we'd be talking about 24 months in prison.

It's not—I think it's too close. I think [defense witness] Mr. Bourne did a very good job of testifying, and it assisted your defense greatly.

But if I find out that there is this fraud word involved in this part, you know, Mr. Vleisides, as we say here at the courthouse, you need to get your toothbrush and get your things in order, because fraud will not be tolerated, you understand that? So I would work very hard to make these consumers happy consumers who you've dealt with. Restoration Hardware and Hobby Lobby? In the new civil complaint, the FTC asks the court to freeze corporate and individual assets to 'preserve them for potential restitution to victims' and to appoint a 'temporary receiver' over the company. A, the FTC attorney, said Butterfly Labs engaged in 'systematic deception.'

She writes: Records indicate that once consumer funds enter into Defendants’ bank accounts, they are quickly dissipated. In recent months, despite receiving large sums of money each time consumers place orders, Defendants generally leave no more than approximately $2.5 million in the operating bank account. Instead, funds are depleted shortly after they enter into the bank accounts after consumers place their orders. There is substantial evidence that corporate funds are being diverted for seemingly personal use: department stores, day care services, massages, and home improvement (such as architectural services and saunas). Defendants’ corporate credit cards also reflects numerous non-business expenses, including department stores (including Nordstroms, Bed Bath and Beyond, Restoration Hardware, and Hobby Lobby), auto maintenance, gun stores, and hunting stores. Cases abound. Bitcoin Cash BCH Mining Limit.

Further ReadingBFL has been facing legal cases from near and far. In December 2013, a German-Polish man who lives in China that was never fulfilled; he accused BFL of breach of contract, fraud, and negligent representation. And Butterfly Labs lost a civil case by default in Kansas’ Johnson County Court in late November 2013.

The, a Californian named, won a of more than $13,000 but told Ars earlier this year that he has not yet collected the award. The company's troubles worsened from there. A lawsuit filed in early April 2014 (read the) accuses BFL of engaging in 'deceptive and unconscionable business practices.' The suit, which seeks class-action status, was. That case accuses BFL of collecting payment for 'non-existent Bitcoin mining equipment, failing to ship Bitcoin mining equipment orders for which consumers have pre-paid, misrepresenting the date such equipment is to ship to customers, and profiting from Bitcoin mining for Defendant’s own benefit using customers’ equipment without permission or authorization from customers.' UPDATE 2:15pm CT: Butterfly Labs' spokesman, Charles Zinkowski, sent Ars this, declaring that the company was 'disappointed in the heavy-handed actions' of the FTC. 'Butterfly Labs intends to defend our business and our nascent and promising industry,' the company said.

'The government wants to shut Butterfly Labs down, and we are not going away without a fight to vindicate bitcoin, our company, and our employees.' Zinkowski also did not respond to further questions.