Butterfly Labs Josh Zerlan Deposition Hightlights

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The community has been ablaze about the news of Butterfly Labs and the FTC lawsuit against the embattled company and this morning Coin Fire has learned of more details before the hearing set to take place today.

Josh Zerlan the VP of Product Development has given his testimony in a deposition performed with the FTC and we’d like to take a few minutes to highlight a few key elements of that testimony that our readers might find interesting.

Coin Fire will be working throughout the case to get further information and will be posting new entries as further information is obtained.

Screenshot 2014-09-29 09.55.41Josh Zerlan gave testimony that he received a set of 10 Butterfly Lab Singles from the company as part of his compensation package.Screenshot 2014-09-29 09.56.00

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We later would learn in the deposition that Mr. Zerlan personally generated about 15 BTC before returning the hardware to the company. He did not give a reason specifically why he had returned the hardware.

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He was also promised by the company a Monarch but it has yet to be received.

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Screenshot 2014-09-29 09.59.37Screenshot 2014-09-29 09.59.55Screenshot 2014-09-29 10.00.18Screenshot 2014-09-29 10.00.47Mr. Zerlan also used a company credit card to purchase guns for his own protection after receiving threats from the community.

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After repeated denials from the company and Mr. Zerlan himself in the past on the Butterfly Labs website, the BFL website and other locations on the Internet that the company DOES NOT mine on customer purchased hardware before sending it out he gave new testimony indicating that those statements were false and that the company was mining using hardware that had already been purchased by customers.

The following pictures taken from Butterfly Labs shows customer equipment that was being actively used to mine bitcoins for the direct benefit of the company.

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Elizabeth T. Han, an investigator with the Federal Trade Commission also gave the following statement regarding the user of customer miners for mining internally.

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Screenshot 2014-09-29 10.47.06Butterfly Labs also purchased EMC Mining Pool and has failed to provide that wallet to the FTC and this has been noted later in the deposition.

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Screenshot 2014-09-29 10.09.50Coin Fire is highly suggesting anyone currently mining on EMC please begin moving your miners as it is likely after today’s hearing these wallets will be taken over by the receiver based on later information in the deposition.

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Chat transcripts internally show that the company was also actively working to defraud customers and find reasons to cancel orders.

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They also show the company’s internal panic as other companies cropped up with better systems and the subsequent debates if they should lie about the progress they are making to deflate some of the announcements.

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It also appears the company actively worked to defraud Dwoalla with transfers to personal accounts even suggesting they claim they were “customer accounts” in internal chat transcripts to make transfers immediate and in violation of Dwoalla’s TOS.

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We also learn that the company knew how behind it was and began debating what lies to tell the public to manage shipping expectations.

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The company was also aware internally they would not make the shipping times promised but continued to lie publicly.

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It now appears we are just barely scratching the surface on what remains to be an even larger story. More information will be coming in the near future.

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Coin Fire

Coin Fire is a cryptocurrency news site started on June 6th of 2014. The site focused on hard-hitting investigative stories. Coin Fire was acquired by 99Bitcoins on October 2015.

2 Comments

  1. This company had no shame. This explains why my miner that was purchased at 50M difficulty was not received until difficulty was 1B. like many, i fell victim to these bastards. i hope they go to jail. If there is a place to sign up for a class action, please post.

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