FTC Shuts Down Bitcoin

The Federal Trade Commission has shut down a company that sold bitcoin-mining devices that the agency said were never shipped or completely useless upon arrival.

Missouri-based Butterfly Labs is accused of stealing thousands from consumers who were looking to mine bitcoins. The company sold bitcoin-mining devices that ranged in price from $149 to $29,899, the FTC said, as well as a cloud-based service that mined bitcoins for consumers who paid for the computing time.

The Butterfly Labs website, which is still live, currently lists a $50 bitcoin miner that you attach to a host computer via USB and a $1,379 bitcoin-mining card that can be attached via USB or two PCI slots.

According to the FTC, however, Butterfly Labs failed to deliver bitcoin-mining computers to approximately 20,000 consumers as of September 2013. Those who did receive them, meanwhile, found them to be ineffective due to the changing nature of bitcoins.

'While more bitcoins are being mined each day, the total number of bitcoins available to mine is reduced in half each year,' the FTC explained. 'Combined with the fact that each new generation of computing technology used to mine bitcoins renders previous generations essentially obsolete, the delay in delivering computers to consumers meant that the bitcoin-mining computers could never generate the amount of Bitcoins that Butterfly Labs promised consumers.'

The cloud-based BFL Clound Mining service, meanwhile, never delivered despite consumers paying thousands of dollars for computing time, the FTC 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,' Jessica Rich, director of the FTC's Bureau of Consumer Protection, said in a statement. '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.'