A district court in Western Missouri has enforced the closure of Butterfly Labs, a bitcoin mining company. The step was taken after the Federal Trade Commission complained that the company is misleadingly marketing of computers to produce bitcoins. The FTC said that the company has fleeced more than 20,000 consumers by charging $50 million till September 2013.
The company started marketing its BitForce Computers in June 2012. The computers were priced in between $149 -$29,899. Last year it introduced another model Monarch with a price tag of $2,499 to $4,680.It is alleged that Butterfly Labs shipped old computers which were unable to provide bitcoins. The company did not ship the computers at all in some cases.
As of September more than 20,000 consumers did not receive the computers at all. Bitcoins are hard physical assets or any central bank and users are able to mine them only after they solve a progressively complex algorithmic formula. Once the formula is solved the user is awarded a particular number of bitcoins. With time as the mining progresses more complex computers are needed to solve these algorithm formulas and Butterfly Labs sold computers of every configuration.
FTC’s Bureau of Consumer Protection director Jessica Rich said: “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. 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.”