I’m having trouble figuring out if this is shocking or expected.
Federal Trade Commission lawyers allege that bitcoin mining manufacturer Butterfly Labs used customer-ordered bitcoin miners to mine bitcoin for their own benefit before shipping to customers, according to Ars Technica.
Lawyer statements earlier this month allege the company was deceptive and fraudulent in their practices, spending millions of corporate revenue on personal luxuries like guns and saunas.
In a declaration, former Butterfly Labs head burn-in technician, Samuel Johnston, had the following to say:
[blockquote style=”2″]While I was employed, with the exception of a two-to-three-week period, all tested machines were set up to mine bitcoins in the Eclipse Mining Consortium (“EMC”). I believe that EMC was owned by Josh Zerlan. I was told by [Production Manager] Mark Goodpasture at one point that the mined bitcoins generated by the burn in process would be put into a fund to benefit employees or charity. However, I later learned from discussions with Mark and other personnel that there was no such charity or employee fund. Instead, the burn in process was set up to mine bitcoins for the company’s benefit.[/blockquote]
And if you thought their burn-in mining operation was small-time, think again. Collectively, the tested machines were hashing at 12 TH/s. That would be approximately three percent of the bitcoin network as a whole at the time.
Adding insult to injury
While consumers who had just spent hundreds (in other cases thousands) on miners, Butterfly Labs also (allegedly) had foam pitchforks mocking their own customers, documents and photos suggest.
At the time of this writing, Butterfly Labs’ website reads the following statement:
[blockquote style=”2″]BF Labs, Inc. has been placed in a temporary receivership pursuant to court order, Case No. 4:14-cv-00815-BCW. There will be a hearing on September 29, 2014 at 9:00 a.m. at the Charles Evans Whittaker Courthouse in Kansas City, Missouri. At the hearing, the court will consider this matter.[/blockquote]
You can read the fantastic piece by Ars Technica on this news here.