Butterfly Labs Faces Civil Lawsuit

Butterfly Labs

Butterfly Labs (BFL), an ASIC Bitcoin mining company, is facing a civil lawsuit in an American federal court. The problem with this company is that the mining machines are not being delivered to the customers. A German-Polish man living in China, Martin Meissner, never received his order that was placed in March 2013 and he didn’t get a refund either. Meissner said that he spent over $62,000 to order two of BFL’s mining machines. In December 2013, he filed a lawsuit against BFL that accused the company of fraud, breach of contract, and neglectful representation.

Robert Flynn, Meissner’s attorney, told Ars, a tech-news website, that other people including local attorneys have contacted him about the lawsuit. It seems that if Meissner’s case is found to be successful, then it is highly likely that other lawsuits will be filed against BFL.

BFL filed a motion to discharge the complaint “for failure to state a claim on which relief can be granted.” Due to the fact that Meissner paid for the machines through his own company’s bank account, he lacks good standing under the KCPA (Kansas Consumer Protection Act) Meissner said,

“I first contacted BFL and asked for a delivery date, and a long time passed without any response, so I went ahead and requested a refund. When BFL responded to the request and rejected the refund, I saw no other way out than to seek an attorney’s help.”

Robert Flynn tried to arrange a settlement for Meissner, however he didn’t get very far. He wanted to offer Butterfly Labs the “opportunity to reach a settlement before things really ramp up and they made an offer, but it’s clear that they’re not serious about reaching a settlement so we’re going to push ahead with the lawsuit.”

In late November 2013, BFL had lost a civil case in Kansas’ Johnson County Court. William Lolli had won over $13,000 but says that he has not collected the money yet.

The problem began when Meissner made a wire transfer payment from TradeMost Enterprises Ltd, his company. This seemingly confused BFL so they did not recognize his order. When Meissner asked BFL, they responded to him:

“We received your money but the bank tells us only “Trademost Enterprises Ltd” so we were not able to match your payment to your order until we got your email. I have received your payment and sent a copy of your invoice for your records. Your order is processing (paid).”

However, Meissner did not receive his order even after this email.

Rush of Business for Butterfly Labs

After selling FPGA miners from September 2011 to 2012, BFL started taking ASIC orders in June 2012. Due to the fact that ASIC was the next-generation machine, everyone wanted it a piece of it. The company was able to sell at least 7,600 orders that were worth $10.2million.

However, a year later, many angry tweets and reddit threads formed because BFL was unable to deliver the machines. To this day, it is still a problem for many people.

Technical Delays

Butterfly Labs had delays in producing the mining machines that resulted in them being unable to deliver to their customers on time. When the company finally fixed their issues, and were ready to fulfill the orders, they sent an email on May 1, 2013, saying that the orders would ship as soon as the machines were produced. Butterfly Labs also said that if someone was not willing to wait, they had the option of cancelling their order and getting a refund. After May 1, anyone who made a new order would see a message that told them the company’s recent terms.

Meissner canceled his order on April 24, 2013 after Bitcoin increased in price and Butterfly Labs had amped up the mining machines prices. Due to the fact that his company, TradeMost Enterprises, Ltd retracted the payment but did not place the order number on the memo in the wire-transfer, BFL

“believed it had received payment for a non-existent order and had to wait for TradeMost to contact it to resolve the unmatched payment.”

Meissner’s lawyer Flynn had this to say,

“I think it’s pretty disingenuous to say it’s [Meissner’s] fault…It’s funny, the blame-shifting game they’re playing. I find it distasteful, the lack of responsibility.”

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