Friday, February 13, 2015

The Strange Locality of Crony Capitalism: Butterfly Labs

I first came across Butterfly Labs as a wandering bitcoin explorer, wanting to put my cash in something besides an American dollar that was probably going to explode into hyperinflation at some point when some banks realize that they are just too many dollars out there.

You can "mine" bitcoins by having your computer make "blocks" or pieces of a bitcoin, which is very challenging to do efficiently except for the most powerful computers.

Enter Butterfly Labs. Butterfly Labs claims to sell powerful machines, specially made so they could quickly and efficiently manufacture bitcoins. Butterfly Labs sold the machines on Ebay, claiming that they were so behind, that customers were automatically put on a waiting list.

Of course it was a scam, there were no machines, or a token amount sold as a front. They got a local judge to overturn the FTC ruling that put them in receivership, and let them start up again...they also might have local collusion because they refuse to sell to anyone around their office location in the Kansas/Missouri area. Guaranteeing local residents won't file claims with local law enforcement, or complain to local politicians.

The owner/runner of the scam, is a self styled Marketing and ECommerce guru named Jeff Ownby:

I thought I might have to kiss the money goodbye, ButterFly Labs doesn't respond to BBB claims. But luckily I bought the computer through PayPal. PayPal didn't want to give the money back either, so I filed a BBB complaint against THEM, and they forced Butterfly to pay me back. Eventually they got banned from PayPal:

And then there's this:

The article alleges that Butterfly Labs used the machines they made, to mine the coins themselves.

The BBB website has a grade of F for Butterfly Labs:


"FTC v. BF Labs, Inc. 
Date of Action: 9/23/2014 
The following describes a pending government action that has been formally brought by a government agency but has not yet been resolved. We are providing a summary of the government's allegations, which have not yet been proven.

On Sept 23, 2014, the Federal Trade Commission filed suit against Butterfly Labs. Charges filed allege the business violated the FTC Act. The lawsuit alleges that Butterfly Labs charged thousands of dollars for its Bitcoin computers, but then failed to provide the computers until they were practically useless, or in many cases, did not provide the computers at all."

So, why am I writing about this now. Because they had the gall to send me an email, telling me that they were back up and running. Ripping people off again!

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