butterfly labs scam

Butterfly Labs allegedly bought a site just to remove content that criticized it, a move that will only make its reputation worse

Thanks to Butterfly Labs vice president of marketing, Jeff Ownby

Bitcoin company Butterfly Labs was recently accused of buying the site Buttcoin.org with the intention of improving its reputation on search engines. Now, Buttcoin’s previous owner is making sure the opposite happens to Butterfly Labs.

One Buttcoin article that criticized Butterfly Labs’ hardware and often appeared in results for the search term “butterfly labs scam” now features an entirely new headline – “The $22,484 Butterfly Labs Mini Rig bitcoin miner is a sexy bitcoin mining machine” (the previous headline called it a “huge, broken, unstable piece of s—t”).

BFL initially estimated a ship date of late November 2012, but the deadline passed and the ASIC machines didn’t appear. Customers got progressively more agitated. In January 2013, Micon wrote on the Bitcoin Forum, the go-to locale for Bitcoin-related discussion, that he “smelled a rat“:

My personal best-guess as to what is going on in general at BFL is that they collected a massive amount (many millions when delimited in USD, exact figure unknown) of pre-orders, thought whatever sourcing they had contracted with could produce working ASIC chips, then there were many delays for many technical reasons likely costing BFL more money, so they responded by massively increasing advertising for more pre-orders. Many ads that are floating around Bitcointalk still say simply “xx Gh/s for $xxx Butterfly labs” when they are clearly not capable of shipping said product at this time. It is impossible to know the exact current state of the company, but it is my impression after my personal interactions with the company executives that they are stressed and lying to the public. They may have a hail-Mary play gambling community pre-order money on another run of chips, or they may have absolutely no product and are collecting as much as possible before they go belly-up, either legally with a chapter whatever bankruptcy or illegally by jumping on a plane with a thumbdrive full of BTC. 1 man’s thoughts, 1 man’s investigation. I smell a rat and I think this one may set the record for biggest btc community loss.

Soon after, Micon put his bitcoins where his mouth was, placing bets on the BFL’s ability to deliver hardware:

At least one ASIC-based Butterfly Labs product will demonstrate 350 Mhash/Joule or more, at stock frequency/voltage, at room temperature, for a sustained period of time of at least 60 minutes, with appropriate current-measuring equipment on the device’s power input(s). Power consumption shall be measured by adding up current from all the device’s DC inputs (12V jack, USB cable, etc.) It will not be measured “at the wall.” The purpose of this bet is to avoid wildly varying efficiencies of power adapters and computer hosts. This bet applies to all ASIC-based products that Butterfly Labs will deliver to the general public. This includes the “SuperComputer” family (Jalapeno, Single SC, Mini Rig SC), as well as possibly any unannounced product that the company will be shipping by June 30, 2013.

This statement is true if, for example, the Single SC achieves 40 Ghash/s at 114 Watt or less (40000/114 = 351 Mhash/Joule) as measured with a clamp meter on its 12V DC input and 5V (USB) input.

This statement is false if all Butterfly Labs products fail to achieve 350 Mhash/Joule, or if Butterfly Labs fails to deliver any product at all.

Finally, over a year after the first orders were placed, after hundreds of angry comments and reddit threads and tweets (example: “WTF is wrong with you? You can’t deliver shit yet u take more $$? Stop fucking delaying Singles on purpose!!”), BFL shipped its first machines in early June 2013. (Arsreceived a review model of the 5 GH/s low-end “Jalapeño” machine a few weeks earlier in May 2013. Look for our full review soon.)

This month, BFL announced it was selling the bare ASIC chips (without the associated hardware) for $75 apiece. BFL is also crediting chips to customers “as a thank you to our customers for being patient with us” for all orders placed before April 1, 2013.

reaD

Sonny Chris Vleisides, who pled guilty to one count of mail fraud in 2010 (PDF) for being involved in an international lottery scam, is an executive at BFL. Jeff Ownby, vice president of marketing and e-commerce at BFL, told Ars that Vleisides is the “lead product developer—he’s the guy who dreams up the projects,” though he declined to provide more details beyond that. By Vleisides’ own account on a Bitcoin forum, he’s the president of a hosting company called Webspawner.com—but it’s not clear if he has a background in electrical engineering or hardware design.

Vleisides doesn’t own the company, though. According to incorporation documents filed in Wyoming, BF Labs Inc. has two listed directors: Chris Vleisides, a Kansas City photographer who takes photographs of the Kansas City Royals baseball team for a living, and an Iranian living in France named Nasser Ghosieri, who is also a “senior IT consultant” with Société Générale, a major French bank.

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