Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: Bitcoin mining computer operation shut down, (Sep 23, 2014)
Organizations Mentioned:BF Labs, Inc.
By Greg Hammond, J.D.
The federal district court in Kansas City, Missouri has shut down BF Labs, Inc., a company that purportedly engaged in deceptive marketing of specialized computers designed to mine Bitcoins, the FTC announced today (FTC v. BF Labs, Inc., File No. 1423058, Case No. 4:14-cv-00815-BCW).
Bitcoins are sometimes referred to as “virtual currency” and can be traded for goods, services, or physical currency. The value of the coins fluctuates, and they are currently valued at nearly $500 per unit. Instead of being distributed by a bank, Bitcoins are “mined” by computer users who can solve increasingly complex algorithmic formulas. As more algorithmic formulas are solved, the codes become are harder to crack and require more powerful computers to solve them.
According to the FTC’s complaint, BF Labs and its officers allegedly sold Bitcoin mining machines and services, charging consumers upfront fees between $149 and $29,899. However, many consumers never received the machines or services, or if they did, the machines were already obsolete, had depreciated significantly, or were defective. As of September 2013, over 20,000 consumers had allegedly not received the computers they had purchased. The FTC filed suit, alleging that BF Labs’ purported misrepresentations and deceptive acts violated the FTC Act.
“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,” stated FTC Bureau of Consumer Protection Director Jessica Rich. “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 hand of consumers.”
The temporary restraining order prohibits BF Labs from making any misrepresentation regarding (1) the amount of Bitcoins or any other virtual currencies defendants’ products or services will generate, or (2) when products or services will be delivered to consumers. The court also placed an asset freeze on the corporation, as well as each of its officers, and required that the corporation grant the FTC immediate access to its business premises and records.
Attorneys: Jonathan E. Nuechterlein, Helen Wong, Teresa Kosmidis, Leah Frazier, Tammy Dickinson, and Charles M. Thomas for the FTC.
Companies: BF Labs, Inc.
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