Bitcoin startup Butterfly Labs settles with FTC for $38.6M, but it can’t pay

Sonny Vleisides (right), is Butterfly Labs' cofounder and largest shareholder. A federal judge told him in January 2014 that there was a "strong smell" of fraud with respect to his company. (credit: Nasser Ghosieiri)

On Thursday, all-but-defunct Bitcoin miner manufacturer Butterfly Labs (BFL) finally settled with the Federal Trade Commission in a lawsuit that has dragged on since September 2014. The case had been scheduled to go to trial in Kansas City next month.

For the last two and a half years, Ars has followed BFL as it has gone from being a curious hardware startup in a nascent Bitcoin mining industry to the target of a federal investigation. Customer orders totaling millions of dollars were significantly delayed or never fulfilled. Back in 2013, Ars received an early model of a BFL miner and successfully used it to mine $700 worth of bitcoins, which we sold for cash and then donated to the Electronic Frontier Foundation. Any miners that shipped now, though, are largely worthless, as Bitcoin mining has moved to the cloud and away from individuals.

Under the terms of the new agreement, which is expected to be formally certified by the federal judge overseeing the case, BFL must pay the FTC more than $38.6 million. However, that sum will be suspended as soon as the company pays a largely symbolic $15,000 and co-founder Sonny Vleisides pays $4,000.

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