Antitrust Law Daily Wrap Up, CONSUMER PROTECTION NEWS: Operators of Bitcoin mining company settle FTC deception allegations, (Feb 18, 2016)

By Michael Menzhuber, J.D., LL.M.

Butterfly Labs and two of its operators have agreed to settle charges by the FTC that they: (1) charged consumers thousands of dollars for its Bitcoin mining machines; (2) either delivered the equipment after it was practically useless or not at all; (3) failed to disclose that they were using the machines themselves before delivering them; and (4) kept consumers’ up-front payments even after failing to deliver machines as promised (FTC v. v. BF Labs, Inc., FTC File No. 142 3058, Civil Action No. 4:14-cv-00815-BCW).

Under the terms of the proposed consent decrees with Butterfly Labs and its part-owner and vice-president of product development Sonny Vleiside, and its general manager Darla Drake, these defendants would be prohibited from misrepresenting to consumers: (1) whether a product or service can be used to generate Bitcoins or any other virtual currency; (2) the date on which a consumer will receive the product or service; and (3) whether the product is new or used.

The settlement agreements also:

• prohibit Butterfly Labs and Vleiside from taking up-front payments for Bitcoin machines and other products used to mine virtual currency unless the products are available and will be delivered within 30 days; and

• require the defendants to issue a refund if a product is not actually delivered within 30 days, provide prompt refunds to consumers if they sell a damaged or defective product; and obtain a consumer’s permission before delivering a product late.

A monetary judgment against Butterfly Labs and Vleisides of $38,615,161 will be partially suspended upon Butterfly Lab’s payment of $15,000 and Vleisides’ payment of $4,000. A judgment of $135,878 against Drake will be partially suspended once she surrenders the cash value of all Bitcoins that she obtained using company machines. The monetary judgments were suspended based on the defendants’ inability to pay and will become due should the defendants be found to have misrepresented their financial condition, according to the FTC’s announcement.

Companies: BF Labs, Inc.

News: ConsumerProtection FederalTradeCommissionNews