A court of the United States has recently shut down Butterfly Labs, a Missouri firm which, according to the decision of the Federal Trade Commission (FTC), deceptively marketed PCs designed to mine (produce) Bitcoins, a popular cybercurrency.


The Federal Trade Commission complained against Butterfly and its corporate officers, claiming that the firm charged consumers thousands of dollars for its Bitcoin-mining “farms” called BitForce, and then failed to provide the machines until they were almost obsolete. In fact, in many cases the company simply didn’t provide any computers at all.

As opposed to traditional currency (“fiat money”), Bitcoins aren’t issued and distributed by a central bank or backed by physical assets like gold. The cybercurrency is created from the thin air – it is “mined” by users who, with the help of computers, calculate increasingly complex algorithmic formulas.

In short words, once a user solves a formula, the Bitcoin network awards them a set number of Bitcoins. When more Bitcoins are mined, the process of “earning” new currency becomes more difficult, as the codes become more complex and the process requires more powerful computers to solve them.

According to the FTC’s Bureau of Consumer Protection, it is not surprising that with a new and little-understood opportunity like Bitcoin, scammers will always find ways to capitalize on the people’s excitement and interest.

So, a Missouri-based company was selling its machines at $149 to $29,899, based on their purported computing power. The Federal Trade Commission pointed out that over 20,000 consumers still hadn’t received their computers they bought as of September 2013, with the defendants in the case including Butterfly Labs, Darla Drake, Nasser Ghoseiri and Sonny Vlesides.