Butterfly Labs is a Bitcoin operator company that sells Bitcoin mining hardware. The company has been shut down by the Federal Trade Commission (FTC) three weeks ago, because of the official accusation of lying and deceiving the customers. Butterfly Labs allegedly took its customers’ money and did not deliver purchased equipment or the equipment that has been delivered was judged as “worthless”. What is more, Butterfly Labs was also accused of multiple ways of lying to the customers, like repetitive changes of the delivery dates. According to FTC, the total sum taken from the customers may reach even $50 million US Dollars. Nevertheless, the company decided to defend itself and issued a Motion to Dismiss on October 10. With this document, Butterfly Labs seeks justice at court and attempts to dismiss the FTC’s complaint. Their Motion to Dismiss states:
“The Motion to Dismiss describes how the FTC’s claims are insufficient as a matter of law and consequently should be dismissed with prejudice. Although filed at an early stage in the litigation, Butterfly Labs views the Motion to Dismiss as an important opportunity to address the legal merits of the lawsuit. Butterfly Labs vigorously disputes these claims, as well as the overall validity of the lawsuit.”
Butterfly Labs’s Motion to Dismiss claims that it has been falsely accused as the complaint is “insufficient” and that “the FTC’s actions have actually harmed, not helped, Butterfly Labs’ customers”. The company also stated a list of reasons why the complaint issued by the FTC should not be regarded as valid. Butterfly Labs claims that the Federal Trade Commission does not hold any kind of evidence to support the accusation that the company’s website is misleading. Moreover, the company accuses the FTC that is operating in order to destroy Butterfly Labs and that it is doing so with “heavy-handed” actions without any solid evidence.
In the court’s fillings, another Butterfly Labs’s line of defence was to emphasize that the company “stopped its “pre-order sales” business in mid-July so it no longer accepted money with a promise to deliver equipment”. What is more, the company’s website was repetitively updated in order to inform their customers about the current status of their orders and the possible delays. According to the company’s attorneys, Buttefly Labs “show[ed] a pattern of consistently updated shipping projections, increasingly detailed production updates, and day-by-day shipping updates”. The company’s attorneys admitted that it took longer than expected to develop the computers and other equipment, but the company did everything to keep its customers posted and did not mislead them on purpose.
Darla Jo “Jody” Drake also commented on the filling:
“I said complaining doesn’t help because we can’t ship any faster just because we hear that you are not happy about it. Do you think we are sitting around BFL with shelves full of miners until we get an email that says, ‘Darn it, I am upset because you haven’t shipped’? Our lives would be different if all the miners were shipped, but the reality is, they are not all shipped yet, but we are doing our best to change that.”
The company experienced continuing problems regarding their machines development, especially their BitForce SC products, and revealed that they still need to deliver orders placed in June 2012. But it also underlined that it is doing everything it can to speed up the process. Now, it may be postponed due to FTC’s complaint.
Last Friday, the Federal Trade Commission and Butterfly Labs came to terms in a presence of a federal judge. It was agreed that Butterfly Labs may “resume limited business”. However, the company itself is not fully satisfied with the result and said that “it continues to work with the receiver to resume its operations”.
In the end, Butterfly Labs will start selling and shipping their products. There still has not been a response to their Motion to Dismiss.