On February 18, the Federal Trade Commission announced that it had settled charges against Butterfly Labs and two of its operators stemming from the alleged deception of consumers regarding new mining machines for the virtual currency, Bitcoin. According to the FTC, the company and its corporate officers charged consumers thousands of dollars for its Bitcoin mining machines, but then failed to deliver the computers until they were practically useless, or in many cases, did not provide the computers at all. The FTC’s complaint further claimed that the defendants failed to disclose that they were using the machines for themselves before delivering them, and that they kept consumers’ up-front payments even after failing to deliver machines as promised.
The settlement prohibits the company and its operators from making misleading claims about their products or taking up-front payments for Bitcoin machines unless those products are available and can be delivered within 30 days. The settlement also includes monetary judgments that are partially suspended due to the defendants’ inability to pay. The judgment against Butterfly Labs was $38,615,161, for instance, but will be suspended upon payment of $15,000.
“Even in the fast-moving world of virtual currencies like Bitcoin, companies can’t deceive people about their products,” said Jessica Rich, Director of the FTC’s Bureau of Consumer Protection. “These settlements will prevent the defendants from misleading consumers.”