Butterfly Labs Attempts to Dismiss FTC Complaint

October 15, 2014

Three weeks ago, the Federal Trade Commission shut down Butterfly Labs. Butterfly Labs is a company that sells Bitcoin mining hardware. It’s been accused of scamming and lying to customers time and time again. Recently, the Federal Trade Commission (FTC) reported that Butterfly Labs was lying to customers in multiple ways, one being that they mined on their customers’ hardware for extended periods of time before shipping it. This morning, Butterfly Labs tried to dismiss the FTC’s complaint.

Also read: FTC Shuts Down Butterfly Labs… Finally

The FTC claims that Butterfly Labs spent their customers’ money on these styrofoam pitchforks

Butterfly Labs Disagrees

Butterfly Labs released a statement this morning about their request to have the FTC’s complaints be dismissed. The statement was written by a public relations company on behalf of Butterfly Labs:

On Friday, October 10, Butterfly Labs filed a Motion to Dismiss the Federal Trade Commission’s complaint against the company. The lawsuit is pending in the United States District Court for the Western District of Missouri.

The Motion to Dismiss describes how the FTC’s claims are insufficient as a matter of law and consequently should be dismissed with prejudice. Although filed at an early stage in the litigation, Butterfly Labs views the Motion to Dismiss as an important opportunity to address the legal merits of the lawsuit. Since the filing of the FTC complaint, Butterfly Labs has been working to restart its suspended business operations as well as defending itself against the FTC’s media campaign claiming that Butterfly Labs is “bogus” and its people are nothing more than “scammers.” Butterfly Labs vigorously disputes these claims, as well as the overall validity of the lawsuit.

Butterfly Labs is not alone in its criticism of the FTC’s actions. Attorneys in a related lawsuit have described in a court filing how the FTC’s actions have actually harmed, not helped, Butterfly Labs’ customers.

Butterfly Labs continues to diligently work with the court-appointed Temporary Receiver to resume operations as contemplated under the Court’s Stipulated Interim Order issued on October 2. Taking care of customers is our primary focus, and we look forward to doing so to the extent we are allowed, under the restrictions placed on us by the FTC.

To summarize, the Motion to Dismiss claims that the FTC’s complaints against Butterfly Labs are ‘insufficient’ and should be dismissed. Butterfly Labs believes that they are not alone with their disagreements, and that “the FTC’s actions have actually harmed, not helped, Butterfly Labs’ customers”. Butterfly Labs is seeking to continue operations.

The Motion to Dismiss

I obtained a copy of Butterfly Labs’ Motion to Dismiss. Sure enough, Butterfly Labs requested to “dismiss Plaintiff Federal Trade Commission’s Complaint in its entirely for its failure to state a claim on which relief can be granted” in a lengthy 31-page document. The request was filed four days ago, October 10. Butterfly Labs gave seven supporting reasons as to why the complaint should be dismissed, including the allegation that the FTC claimed but did not give evidence that Butterfly Labs’ website was misleading. Another supporting argument was that the FTC’s claim that Butterfly Labs’ profitability projections (e.g. return on interest) are misleading is invalid, considering that the value of a Bitcoin fluctuates. As such, profitability projections should, according to Butterfly Labs’ Motion to Dismiss, be viewed more as ‘what-if scenarios’ rather than as true expected outcomes”.


Butterfly Labs is attempting to resume operations, meaning that they would begin shipping and selling products to customers once again. Bitcoiners and spectators await a response to this Motion to Dismiss; CryptoCoinsNews will continue to keep you updated. Even if Butterfly Labs again begins shipping and selling products to customers again, they’d almost certainly be kept under heavy watch by the FTC and consumers alike.

What do you think about Butterfly Labs’ request? Tell us below!

Foam torch image from the Federal Trade Commission; other images from Shutterstock.

Last modified (UTC): October 15, 2014 00:48

Jonathan Saewitz @SuperCryptoGuy

I am a teenager in high school who is very interested in digital currencies. I enjoy researching Bitcoin and other digital currencies, but my favorite crypto is Dogecoin. Please feel free to email me at jonathansaewitz@gmail.com.