Mining hardware maker Butterfly Labs has been shut down by the US Federal Trade Commission (FTC), which accused the embattled company of fraud and public misrepresentation.

On 18th September, the agency was granted permission by the US District Court for the Western District of Missouri to freeze Butterfly Labs’ assets and close the company pending trial, according to documents released by the FTC.

The move comes months after customers began sending complaints to the federal agency, a process that produced nearly 300 filings accusing the company of delaying shipments and refund payments.

Jessica Rich, director of the FTC’s Bureau of Consumer Protection, said that the focus is now on seeking restitution for Butterfly Labs customers, adding:

The FTC filing centered primarily on Butterfly Labs’ continued stonewalling of customers who did not receive mining products after the company announced that they had been shipped. It noted that during the last two years, Butterfly Labs consistently failed to deliver products or services that had been paid for upfront, including cloud mining contracts.

According to the agency, Butterfly Labs violated Section 5(a) of the FTC Act by engaging in “unfair or deceptive business practices in or affecting commerce”. The FTC said that in both its direct sales pitches and in all advertising materials, the company misled consumers on its ability to provide a legitimate service.

Combined, the agency wrote in its filing, these actions constitute a threat to consumer safety, justifying the closure of the company and the seizure of its assets.

The FTC said:

The agency requested that Butterfly Labs be placed in receivership and its operations be suspended in order to cease all activity.

See the full court document below:

FTC Complaint

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