At one point during the uproar over mining bitcoins, Butterfly Labs was a prominent promoter of the machines necessary to cultivate the lucrative digital currency.
But today the Federal Trade Commission said Butterfly Labs has settled charges that they deceived thousands of consumers “about the availability, profitability, and newness of machines designed to mine” bitcoin.
The FTC’s complaint against the company and its corporate officers alleges that Butterfly Labs 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 U.S. agency sued the bitcoin mining equipment provider in 2014. The settlement was announced more than a year after the FTC shut the company following an investigation into suspected fraud and a wave of complaints from disgruntled consumers.
The FTC adds that the settlement also resolves charges that the company and its officers 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.
“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.”
Under the agreed settlement, Butterfly Labs and its part-owner and vice president of product development, Sonny Vleisides, and its general manager, Darla Drake, will be prohibited from misrepresenting to consumers whether a product or service can be used to generate bitcoins or any other virtual currency, on what date a consumer will receive the product or service, and whether the product is new or used.
The settlements also include monetary judgments that are partially suspended due to the defendants’ inability to pay.