Digging for Answers: The ‘Strong Smell’ of Fraud From One Bitcoin Miner Maker
For many crypto-minded libertarians, Bitcoin is the future of money. But that dream hasn’t been helped much by the numerous high-profile legal cases involving the currency in recent years: The Bitcoin Savings and Trust hedge fund collapsed; uncertainty fueled the implosion of Mt. Gox, the currency’s largest exchange; and the high-profile Silk Road takedown is a treacherous story combining Bitcoin, drugs, and alleged murders.
For now, though, one company sits above all others when it comes to cultivating a new level of direct customer mistrust in the Bitcoin community: Butterfly Labs.
For the past year, the Kansas-based Bitcoin miner maker has been embroiled in numerous accusations of fraud. Customer orders, totaling millions of dollars, were significantly delayed or never fulfilled. Through it all, the company insisted that mere manufacturing delays were to blame. However, suspicion never died down. In fact, it’s getting worse after it came to light that Butterfly Labs’ largest shareholder—a man who is a company co-founder, current “Innovation Officer,” and member of the board of directors—pled guilty in 2010 to one count of mail fraud (PDF) for his involvement in an international, multi-million dollar lottery scam.