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Court Order: Butterfly Labs Bitcoins To Be Sold

Posted by timothy on from the now-there's-a-flap dept.

MrBingoBoingo writes In a new development in the case against Butterfly Labs, the court overseeing the case has ordered bitcoins held by Butterfly Labs to be turned over to the court-appointed temporary receiver. The order also gives the receiver authorization to convert the bitcoins "to cash on a systematic and reasoned basis." The justification for this measure is at least to ostensibly create reserves with which refunds for Butterfly Labs' customers may be paid.

41 of 66 comments (clear)

  1. That was a near miss by namhash · · Score: 1

    Almost put money down on one of these....

    1. Re:That was a near miss by Ralph+Wiggam · · Score: 1, Insightful

      You're joking, right?

    2. Re:That was a near miss by dex22 · · Score: 4, Interesting

      I bought one of these. It took a VERY long time to arrive, and only worked for a few weeks. I contacted them for warranty repair and they simply never responded after that. I am out around $3000.

      I'm not a fool or idiot. When I ordered, the marketplace was quite simple and they were the most promising option. It was only after most of us placed our orders with BFL that the trend in the market for pre-orders (and incredibly late deliveries) began, took shape and gained meaning as a deal-breaker.

      The current bad actor in this is Black Arrow - and their reseller, MinerSource. They are 9 months behind on delivering Prospero X1s, and if you call or write, they tell you, "you can cancel your order, but there are no refunds. Here's a link to our non-existant terms you agreed to, which did not exist at the time."

    3. Re:That was a near miss by Cruciform · · Score: 3, Interesting

      I actually managed to get my refund back from BFL, shocking as it seems.
      When I ordered the Monarch there was no "6 months before you can request a refund policy", but they still denied me the refund at first. And then immediately flagged my forum account as moderated.
      When I used info from their site to contact the AGs in Kansas and Wyoming (they claim to be a Wyoming Corporation on their site, though Wyoming says they don't exist as an entity there at all) I posted it to see what the moderator would do. Instant ban.
      Still, on the day the 6 months was up I requested my refund and two days after they said it was wired I got it back.
      I was fortunate. There were other fellows on the BitcoinTalk forum out as much as 60K versus my 2K.

    4. Re:That was a near miss by Ralph+Wiggam · · Score: 2

      Of course there are reasons why BFL is getting in trouble here.

      My question is when did you place your order with them? I'm not part of that scene, but I know there have been serious questions about BFL for a very long time. My friend got kicked out of CES in January 2013 for causing a scene at their booth, basically accusing them of being scammers.

    5. Re:That was a near miss by WhoBeDaPlaya · · Score: 3, Interesting

      Was this for their ASIC or FPGA miners? To their credit, the FPGA miners worked well and ran reliably. Heard some grumblings about the bundled power bricks, but don't know about that since I ran mine off of a regular PSU.

  2. Hardware Ponzi Scheme by WhoBeDaPlaya · · Score: 4, Interesting

    I got in early on a bunch of their FPGA miners. Made obscene money mining and a tidy profit after I sold them and decided to quit mining.

    1. Re:Hardware Ponzi Scheme by DigiShaman · · Score: 1

      Back when they took pre-orders, I placed an order. At one point, I was wondering if it would be worth the investment after launch. A week later after I ponder that question, I received an e-mail from Butterfly Laps asking if I still wanted the order, or cancel with a refund. I took the refund in a heartbeat and never regretted the decision.

      I feel like dodged a bullet. I almost had been "had" by this fucking company.

      --
      Life is not for the lazy.
    2. Re:Hardware Ponzi Scheme by Anonymous Coward · · Score: 1

      I don't know if ponzi scheme is exactly right. BFL is a shit company, for sure. They lied about release dates, lied about when they'd ship stuff out, lied about performance, treated customers poorly, ripped some people off outright by not sending them hardware, made a fool of themselves socially by telling customers if they complained publicly they'd refuse to ship them hardware, and then lowered the cost of hardware before they even shipped the stuff to the first guys (and randomly raised it too).

      But ponzi scheme isn't the right fit. Scumbag lying scam artists, though... that works well.

    3. Re:Hardware Ponzi Scheme by jythie · · Score: 2

      If one is going to be generous, they could also be thought of as people who had honest intentions but got in WAY over their heads.

      In a completely different industry, you see this basic pattern with people on Ravelry who try to dip into selling yarn they spin. Sometimes you will get people who honestly want to do it but just don't have the skills or resources to deal with the project they take on. They work hard, things start to fall apart, they panic, and then the PR mess starts.

    4. Re:Hardware Ponzi Scheme by Anonymous Coward · · Score: 1

      What apparently happened is that they were going in to take advantage of the fact that BTC were still minable without heavy duty ASICs, but people were wanting something to make coins.

      Of course, the main thing is that the company tried to make money and split during a time where so many people came to the BitCoin table, but before the players with vast CPU power that it made it pointless for all except them to bother mining coins. A box on my desk which has to mine at least five coins before I see any return would be sitting there indefinitely.

      Ironically, BFL could have stayed in the game long term, had they offered FPGA based items, and the ability to switch currencies. I can mine altcoins or dogecoins and turn those into BTC for a lot better returns than I can crunch BTCs out.

    5. Re:Hardware Ponzi Scheme by ultranova · · Score: 4, Insightful

      A Ponzi scheme is when you use money from later investors to pay earlier ones to create an illusion of a profitable business where none exists. For a hardware vendor to pull a Ponzi scheme on their customers would require them to conduct some weird "send us a computer, we'll send you two later" stunt. Not delivering paid-for hardware is a simply fraud, not a Ponzi scheme.

      Seriously, stop calling every shady business practice a Ponzi scheme.

      --

      Forget magic. Any technology distinguishable from divine power is insufficiently advanced.

    6. Re:Hardware Ponzi Scheme by ShaunC · · Score: 3, Insightful

      It sounds like you lucked out. From everything I've read, the business plan is indeed a pyramid of sorts,

      1. Announce upcoming mining rig that beats everything on the market
      2. Begin taking pre-orders
      3. Use pre-order money to actually source the dream hardware you promoted in step 1
      4. Hardware arrives, use it yourself for several weeks to mine your own BTC while it's still profitable
      5. During this time, apologize to everyone who has placed orders and ensure them that delivery will be made soon
      6. Once your new top-of-the-line rigs are a few weeks out of date, order a new round of even better hardware
      7. Ship your rigs to your customers
      8. Repeat ad infinitum

      That you actually managed to get some rigs that were still worth using is pretty nice. I guess they hadn't yet figured out how the mining hardware pyramid is supposed to work. The fact that people are still falling for this ploy after it's played out several times over in very public fashion is rather depressing, though.

      --
      Thanks to the War on Drugs, it's easier to buy meth than it is to buy cold medicine!
    7. Re:Hardware Ponzi Scheme by david_thornley · · Score: 1

      You can run a Ponzi scheme with hardware. It costs you $125 to make an X, and you anticipate cascading sales so you sell an X for $100. You have to send something to your earlier customers, so you use money from your later customers to produce it. You figure when your peak likely is, so you loot the company and vanish.

      --
      "When you have eliminated the unacceptable, whatever is left, however improbable, must be the truthiness" - Holmes
    8. Re:Hardware Ponzi Scheme by forrie · · Score: 1

      I essentially accused them of this a year or so ago. I managed to get my CC company to refund two charges (undelivered items), after clearly outlining my theory and showing several cases where I suspected them of fraud; the one I got stuck with (because I paid cash, silly me), eventually crapped out. I got no response from them about it, either (it's a smaller ASIC 5 gh/s).

      I'd like to see some of them go to jail...

  3. So ... WTF is it? by Anonymous Coward · · Score: 2, Insightful

    Since TFA and TFS don't actually use any big-boy words to tell us who the hell Butterly Labs are ... what the hell are they and why the hell should I care?

    1. Re:So ... WTF is it? by tyggna · · Score: 3, Informative

      They were a circuit board and IC provider that specialized in bitcoin mining hardware.

    2. Re:So ... WTF is it? by jythie · · Score: 4, Informative

      They were one of the early companies making ASIC Bitcoin rigs and had a bit of a reputation for long delayed delivery, often to the point the rigs could not make the money back.

    3. Re:So ... WTF is it? by Anonymous Coward · · Score: 1

      They made "shovels" that people could use to mine for bitcoins. Except the shovels weren't available for shipment, but they took pre-orders (and payment) anyways. Most of the shovels never got shipped, and when some customers did receive shovels, it seemed that the shovels have been used already, possibly by the company.

      So the company sat on a pile of cash from pre-orders, didn't ship shovels to customers, used the customers shovels to mine for bitcoins, and then eventually shipped some of these used shovels out to customers.

      Then the company declared bankruptcy.

    4. Re:So ... WTF is it? by jythie · · Score: 1

      To be fair, editors have to take guesses at what is going to be common knowledge in the readership vs things that need to be explicitly stated. It is not always an easy thing to get right, and always erring on the side of explaining is its own problem.

    5. Re:So ... WTF is it? by aardvarkjoe · · Score: 3, Insightful

      To be fair, editors have to take guesses at what is going to be common knowledge in the readership vs things that need to be explicitly stated. It is not always an easy thing to get right, and always erring on the side of explaining is its own problem.

      It's too bad that nobody has invented a method where a link to a full explanation could be included within the summary itself. Maybe when people start using this new-fangled "world wide web" thing, we'll be able to do cool things like that.

      --

      How can we continue to believe in a just universe and freedom to eat crackers if we have no ale?
    6. Re:So ... WTF is it? by jythie · · Score: 1

      Even that can get obnoxious. For instance, it is unlikely here anyone needs to have Microsoft or Intel explained to them. What companies will be instantly recognizable to the community is not always obvious and you do not want to assume that everything needs to be explained.

  4. Re:Nice by Holi · · Score: 1

    No, they recognized the mining rigs as having value, and that they were either delayed to the point of obsolescence or never shipped at all.

    --
    Sorry, teleporters just kill you and then make a copy. A perfect, soul-less copy.
  5. History by Falos · · Score: 1

    I hope this is provisional or whatever and they're not setting a precedent of "we can do whatever we want with seized shit", even though in this particular case it seems reasonable.

    1. Re:History by jythie · · Score: 1

      Actually this is pretty standard when dealing with non-cash assets that need to be transferred over to debt holders.

  6. Re:Nice by stevez67 · · Score: 5, Insightful

    Recognizing the value of an asset (e.g. stocks, bonds, paintings, sculptures and etc.) doesn't confer legitimacy as a currency.

  7. Refund in cash? by ArcadeMan · · Score: 2

    The order also gives the receiver authorization to convert the bitcoins "to cash on a systematic and reasoned basis." The justification for this measure is at least to ostensibly create reserves with which refunds for Butterfly Labs' customers may be paid.

    If I had acquired my Bitcoins when they were worth over 800$USD, I would sure as hell prefer to be refunded in Bitcoins.

    --
    Get free satoshi (Bitcoin) and Dogecoins
    1. Re:Refund in cash? by Anonymous Coward · · Score: 1

      The order also gives the receiver authorization to convert the bitcoins "to cash on a systematic and reasoned basis." The justification for this measure is at least to ostensibly create reserves with which refunds for Butterfly Labs' customers may be paid.

      If I had acquired my Bitcoins when they were worth over 800$USD, I would sure as hell prefer to be refunded in Bitcoins.

      That makes no sense. You want to be refunded with an asset that is worth a fraction of what you paid for it? If it's cash, at least one could argue for suing for the old value of the coins, though you may not succeed or be able to collect. But by refunding in bitcoin you guarantee that outcome.

    2. Re:Refund in cash? by ArcadeMan · · Score: 1

      If they refund using the value of Bitcoins at the time of purchase, then fine. If they refund with today's value, I'd prefer Bitcoins, just in case in goes up again.

      --
      Get free satoshi (Bitcoin) and Dogecoins
    3. Re:Refund in cash? by rahvin112 · · Score: 2

      So take the cash and immediately purchase new bitcoins so it can go up again. The courts don't hand over businesses physical assets to investors, they sell everything then disburse the cash so there's no claim that someone got treated unfairly.

    4. Re:Refund in cash? by istartedi · · Score: 1

      Actually it makes plenty of sense. The choice of whether or not to realize a capital loss should be his. If he pays BTC and gets refunded in cash, that complicates matters. My understanding of how the IRS would treat this is hazy, as I'm neither a tax expert nor a BTC user; but it's not totally out to lunch. He may have to write down the loss when he really wasn't looking to do a tax-loss sale. Even if the tax issue were not in play, the decision of when to convert should be his.

      --
      For all intensive purposes, "whom" is no longer a word. That begs the question, "who cares"?
  8. Of course, they wouldn't want to be refunded in by mark_reh · · Score: 1

    bitcoins!

  9. Re:Nice by Anonymous Coward · · Score: 1

    I don't believe the feds ever really rejected crypto currency or refused to acknowledge it. in fact didn't they come out recognizing its legality and all

  10. It is now time... by bobbied · · Score: 1

    To get rid of your BitCoin because you can bet the exchange rate will be trending down as they sell...

    --
    "File to fit, pound to insert, paint to match" - Aircraft Maintenance 101
  11. Re:Fail on the FTC by Ralph+Wiggam · · Score: 1

    Word got around a couple years ago. They told everyone to fuck off and kept their deposits.

  12. Re:Nice by jythie · · Score: 1

    Given how previous attempts at digital currencies often were not even legally recognized as having value at all, it is still a big step.

  13. Re:Fail on the FTC by jythie · · Score: 1

    Enforcing contracts is part of the FTC's job. Butterfly labs took payment in exchange for goods and services they did not deliver, thus they are essentially holding on to assets they do not own. The market might decide future sales, but for past ones, the market does not really have a mechanism for that. This is where the legal framework comes into play. Someone steals your stuff, the state can get it back.

  14. Re:Bullsh!t by redback · · Score: 1

    devices is a perfectly good plural, dont reinvent the wheel.

  15. Re:Fail on the FTC by Anonymous Coward · · Score: 1

    They literally stole money from people. If anything, they should face criminal penalties like a pickpocket would.

  16. Re:I have a serious question.... by Toasterboy · · Score: 2

    It's built into the design of bitcoin. It automatically adjusts the difficult of mining up (never down) based on the rate at which coins are mined in heats. Every time a faster ASIC for mining comes out, the difficulty shoots up correspondingly. At best you can mine a good percentage of the blocks in the current heat with a new machine before the difficulty shoots back up and the new ASIC performance is the new baseline The new asics are still better than the poor schmoes running regular cpus or gpus, but it's quite difficult to "get ahead" with mining unless your mining resources are free, such as harvesting cpu cycles form a botnet.. There are a finite number of bitcoins, and with every block of them found the difficulty to mine the next batch goes up very fast.

    I recently thought about getting some ASIC mining hardware, but after running the numbers and factoring the cost of electricity, and the current price of bitcoin, it was dubious whether the devices would even make back their cost even if they did ship on time and perform as advertised. Even just running mining software on cpus and gpus I already own is a losing proposition due to the cost of electricity. Not really a good investment, unless you're on unmetered power, such as college dorms.

    The way that that the mining difficulty cranks up with blocks returned, the developers of any new fast ASIC hardware will reap the greatest benefit of the faster hardware during development, and by the time you get it in your hands the bitcoin ecosystem will have already cranked up the difficulty. It will still be faster than older hardware, but since the difficulty cranked up too, it's likely going to produce much less than you initially expected.

  17. Re:I have a serious question.... by petermgreen · · Score: 1

    Despite the substantial presense of scammers it's clear that some ASICs have made it to customers.

    Also theres suspicion that the reason many ASIC devices were delayed until they were no longer profitable was because the makers were mining themselves rather than fulfilling orders.

    There have also been reports of some big bitcoin mining operatinons starting up, possiblly big enough to bypass the bullshit and get their own chips made.

    --
    note: i'm known as plugwash most places but i screwd up registering that here somehow in the past and now can't register