FTC Shuts Down Bitcoin Mining Rig Maker Butterfly Labs

As Bitcoin rose in value and the popularity of cryptocurrencies spiked, companies began cropping up hawking pre-built PCs called mining rigs designed specifically for digital mining. One such company was Butterfly Labs, which was just recently shut down by the FTC over questionable business practices.

A quick trot through the Internet will reveal customers less than happy with Butterfly Labs, reporting things like lack of communication and never receiving the product they ordered. The FTC caught wind of their troubles and took swift action, going so far as to call the folks behind Butterfly Labs "scammers".

The FTC requested that a federal court shut down the company, doing so under the claim that it used "deceptively marketed specialized computers" for Bitcoin mining, charging people for the aforementioned machines but then either never shipping them, or shipping them with such a delay that the drop in Bitcoin value rendered them useless.

Butterfly Labs required its customers to pay the full price of its machines up front, and by September 2013, says the FTC, in excess of 20,000 people had not been sent their mining rigs. Those who did get their computers did so when the value of the Bitcoin was so low it made the machines little more than "room heaters."