The U.S. Federal Trade Commission shut down Butterfly Labs, a company capitalizing on the Bitcoin market, after thousands of customers complained about not receiving the equipment that they purchased.
Aside from individual complaints, the company is also facing class lawsuits. The initial investigation revealed that Butterfly Labs started taking orders from customers for mining rigs worth as much as $29,899 as early as June 2012. But, none of the 20,000 pieces of equipment reached customers until September 2013.
Similarly, the company also took orders for its Monarch equipment in August 2013, but only a few have been delivered to buyers as of August 2014, CNET reported.
"Even where Butterfly Labs did deliver a Bitcoin mining computer to a consumer, the complaint notes that because of the unique nature of the Bitcoin system, the outdated computers were useless for their intended purpose," the FTC said in a statement.
Jessica Rich, director of FTC's Bureau of Consumer Protection, explained that in times when a new opportunity like Bitcoin emerges, there will always be scammers who will take advantage of the public's interest and excitement over the new technology.
"We're pleased the court granted our request to halt this operation, and we look forward to putting the company's ill-gotten gains back in the hands of consumers," Rich told the Wall Street Journal.
Meanwhile, Butterfly Labs resented the decision of the court.
"In a rush to judgment, the FTC has acted as judge, jury and executioner," the company said in a statement issued on Tuesday.
Butterfly Labs explained that, in total, it has sent over $33 million worth of its equipment to customers, and also repaid a total of $17 million worth of refunds for cancelled orders. The company expressed that it will defend its business and testify to the court on Sept. 29 before U.S. District Judge Brian C. Wimes in Kansas City.
