Butterfly Labs to Reopen Under Court Oversight

Butterfly Labs argued successfully in court yesterday that the order to remain closed had irreparably harmed their company, convincing the Judge to agree to allow them to continue operations under court oversight.

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Butterfly Labs to Reopen Under Court Oversight

Butterfly Labs argued successfully in court yesterday that the order to remain closed had irreparably harmed their company, convincing the Judge to agree to allow them to continue operations under court oversight.

The company, which produces Bitcoin mining equipment, was closed down in September after allegations that it had failed to deliver products on time to its customers and that it had used their customer’s equipment to profit from mining.

Butterfly Labs logo

Butterfly Labs attorney, James Humphrey, working with Polsinelli PC, filed a motion last month requesting that the complaint be dismissed because the Federal Trade Commission´s complaint had failed to state a claim upon which relief could be granted.

Humphrey said in his motion that the FTC had not put forth any facts establishing that his clients, Butterfly Labs, had made any representation that was material and likely to mislead consumers. His statement read in part:

"The Butterfly Labs web site pages attached to (the FTC complaint) instead show a pattern of consistently updated shipping projections, increasingly detailed production updates and even day-to-day shipping updates."

While the FTC cited from Butterfly Labs web pages, they had failed to attach either the pages or social media entries upon which their claims were based.  During one hearing in November, the FTC produced live witnesses in an attempt to convince the judge to keep the company closed down and, at that point, Judge Brian Wimes agreed and kept the company´s doors shut and in receivership.

The company´s most recent arguments were that the FTC´s rash decision had cost company employees money and damaged relationships with key vendors.

Bruce Bourne, Butterfly Labs CEP also complained that they had been forced to issue hundreds of refunds after operations had been halted by the FTC.

The federal agency argued that if the company were allowed to continue operating, irreparable harm would come to customers because delays in shipping result in the mining machines losing value. They alleged that many customers received machines so late that they were practically worthless. They also claimed that Butterfly Labs was using the machines to mine for their own profit before shipping them.

The new order will allow the company to resume its operations but it will be required to function under court supervision until the matter can be resolved. What form this supervision will take has not yet been announced by either the court or attorneys on either side of the case.


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