The Federal Trade Commission has taken Butterfly Labs, Inc. to court, accusing it of scamming would be Bitcoin miners over the sale of mining equipment.

Butterfly Labs has been in the hot seat since last year when it was revealed those who bought its ASIC Bitcoin mining gear either received their merchandise extremely late (costing them money), or never at all. The company then came under fire for a comment attributed to its spokesperson Josh Zerlan on the company’s forum: “You received no answer because your question was so incredibly stupid that it doesn’t deserve an answer.”

Earlier this year, it was reported the FTC had received around 300 complaints against Butterfly Labs from disgruntled consumers. Now, the agency now has taken the matter to court. The FTC alleges that Butterfly Labs scammed “thousands” of people at a cost of “tens of millions of dollars.”

Bitcoin mining can be extremely lucrative, and was even more enticing around 12-18 months ago when less people were doing it. If you’re not familiar with the term, mining is a process wherein a computer solves a mathematical problem to facilitate transactions and produce new Bitcoins. When a problem is successfully solved, the miner is given 25 Bitcoins as a reward. At today’s rate, 1 BTC is about $428, which means the reward is about $10,700. But these days, Bitcoin mining requires heavy duty computing power as the difficulty of the math problems increases exponentially. This is why people turned to Butterfly Labs to help them get started. The company offered a range of high-powered Bitcoin mining rigs at competitive price points

Jessica Rich, director of the FTC’s consumer protection bureau, explained: “When a new and little-understood opportunity like Bitcoin presents itself, scammers will find ways to capitalize on the public’s excitement and interest.”

The FTC’s request for the operations of Butterfly Labs to be shut down has been granted by a federal judge.

FTC attorney Helen Wong said that the agency is “always interested in any issues that impact consumers,” and added that “the basic consumer principles of making representations to consumers — and meeting them — always apply, no matter what industry you’re in.”

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