Bitcoin company Butterfly Labs denounced the Federal Trade Commission for forcing the Missouri company to shut down, accusing the government of “go[ing] to war on Bitcoin.”
“Their current media campaign should only further alarm a knowing citizenry and raise questions as to why the FTC wouldn’t simply let this case play out through the judicial system,” the company said Tuesday afternoon.
Earlier Tuesday, the FTC announced that a federal court had agreed to a request to shut down Butterfly Labs. The government charged in a complaint earlier this month that the company has defrauded customers by selling Bitcoin-related technology that was outdated by the time it was delivered. The FTC subsequently requested the shutdown to prevent further harm to consumers.
Jerry Brito, executive director of the Coin Center, a nonprofit group advocacy group for “crypto currencies” such as Bitcoin, criticized the company for saying the government was declaring war on the currency itself.
“That is not helpful. That is not what this is about,” said Brito, an adjunct professor at George Mason University law school. The company’s claim clouded the actual issues in the case — whether it delivered on the promises related to the technology it sold. “This is not about Bitcoin, per se.”
Bitcoins are a “virtual currency” used by some people online as an alternative to the dollar and other currencies. Butterfly Labs sold computers and related technology that allowed users to “mine” the coins — that is, essentially, to create them.
The technology related to Bitcoin-mining changes rapidly, though, and the FTC said the company delivered its products six months to a year late — when it delivered them at all — by which time the devices could no longer be used for mining.
“It would be as if you ordered an iPhone 6 and by the time you received it Apple was releasing an iPhone 7,” Brito said.
That constituted fraud, said Jessica Rich, director of the FTC’s Bureau of Consumer Protection.
“We often see that when a new and little-understood opportunity like Bitcoin presents itself, scammers will find ways to capitalize on the public’s excitement and interest,” Rich said.
She said FTC officials were “pleased the court granted our request to halt this operation” and were trying to refund the money of consumers who brought the company’s products.
The company countered that the government’s action was preventing it from fulfilling it obligations.
“Butterfly Labs was literally is in the midst of shipping out completed products to fulfill the remaining millions of dollars of orders on our books and issuing requested refunds, when the FTC effectively closed the doors of Butterfly Labs without any chance to be heard in court,” the company said.
