The Federal Trade Commission (FTC) have on 18 September 2014 ordered to suspend the activities of ButterFly Labs. Some details:

• They have taken between 20 and 50 million dollars in pre-orders.
• Took orders starting June 2012, by September 2013 more than 20,000 customers still not received their orders.
• Reportedly they have not delivered for 12 months or similar,  and by the time miners were shipped, the amount of bitcoins produced was incredibly low, like less than 1 % of what was expected (see Section 2.4 in this paper).
• The FTC attorney has said that ButterFly Labs engaged in “systematic deception”.  The FTC is also now very clearly saying that ButterFly Lab have mined with customer machines and at the same time they made public announcements to the contrary, and they mocked their angry customers.
• We recall that they have also cheated their customers on the power consumption:
  In October 2012 they have announced:
  • “We are so confident in our power consumption that we are offering up 1000 BTC to charity if we miss our power consumption targets by more than 10%. We are offering our devices at 1 watt consumed per gigahash. If our power targets end up consuming more than 1.1w of power per gigahash, we will donate 1000 BTC to charity! How is that for confidence in our power usage?”
  • Later they delivered machines consuming 3.2 W and actually for most people they delivered nothing at all for a very long time.
• It was known since September 2012 that the CEO of Butterfly Labs was a convicted felon in a 25M dollars mail fraud scam.

Well done the Feds, better late than never. Overall this shows that free market did not function very well: in spite of all the warning signs and in spite of tens of thousands of angry customers, this company has been in business for years.
Let’s hope they go to prison or at least that victims get some compensation .

What About Other Companies?

Many other companies deserve proper investigation for fraud. For example:

• Bitmine.CH have an appalling track record and are still there mining with customer money obtained on repeated empty promises. They have let down a lot of customers, nobody knows how many.

These companies above are real businesses, they just have let down their customers very badly. There is yet much worse.  Other companies never existed, and were pure criminal scams, for example:

• HashBlaster.com, never existed, the website based in Panama was shut down 3 days after I wrote about them. Run with the money paid by the customers.
• XtremeMiners.net, never existed.
• There were a few other. Some responsibility lies with this web page which have listed several scams over the years as if they were genuine companies. I think also that many journalists who wrote about miners have failed to do their job correctly: they avoided to talk about scams and avoided to warn the victims.