The Federal Trade Commission (FTC) has secured the authority to begin converting Butterfly Labs’ bitcoin holdings into cash reserves.

The motion was granted by the US District Court for the Western District of Missouri on 29th October and marks the latest update in the case that began when the FTC filed a lawsuit against the company for fraud and misrepresentation this September.

At the time, Butterfly Labs was closed pending trial, although it has resumed limited business operations under court receivership. The designation means that a court-appointed receiver has been in control of the business, and that this individual will now be able to “manage and administer” the company’s finances.

The latest filing suggests that the receiver will seek to cover potential refund liabilities the company may incur by liquidating the company's bitcoin assets.

The court filing reads:

The FTC receiver may now hire independent professionals or contractors to ensure the safe transfer of the company’s bitcoins to the court-controlled wallet.

The agency responded to requests for comment, but declined to elaborate further on its latest proceedings in the case.

Although a largely procedural update in the ongoing case, the motion may be notable due to the fact that Butterfly Labs is likely to have carried out substantial portions of its business operations in bitcoin.

Butterfly Labs is alleged to have generated bitcoins by conducted extending testing of the bitcoin mining machines it manufactured before delivering the units to consumers, while former employees have been accused of profiting by using products returned by customers for personal use.

An early market leader, Butterfly Labs supported the bitcoin ecosystem through partnerships, and accepted bitcoin as payment for its bitcoin miners – even selecting emerging bitcoin startup BitPay as its exclusive online payment processor for sales of its then-new ASIC miners in 2012.

Butterfly Labs selected BitPay over online payment services provided by Dwolla and PayPal, which lead to record processing figures for the startup.

Pursuant to the case’s original filing, Butterfly Labs will now move toward an eventual court case.

In the original filing, the FTC sought to secure relief on behalf of the consumers, seeking the authority to refund consumers and sell off any illegally obtained.

Butterfly Labs continues to be preserved as a legal entity and could eventually resume operations, depending on the outcome of its court case. Company executives have previously spoken out about the actions taken by the FTC, asserting that the agency overreached when closing its operations and that the firm will be vindicated in court.

The US District Court for the Western District of Missouri told CoinDesk that the case is still in its earliest stages and that no upcoming court dates have been set.

Image via Shutterstock