Preemptive strike, to have on hand for when Butterfly Labs gets hauled off to jail in corpore

Butterfly Labs aka BFL is probably the largest BTC scam to date, at least if we judge by the publicly known list.

Their story goes something like this : convicted felon on probation Sonny Vleisidesⁱ breaks terms of his probation, associates with others, starts a "company"ⁱⁱ which takes money from people in exchange for promises.

The promises are that it will create and deliver FPGA-based BTC mining units, within some specified parameters (power consumption, hashes output per second etc) and within a definite time interval. The promises aren't kept, in the sense that the time interval as specified, as extended, as extended again and as extended yet again is not met. The promises are kept in the sense that something is delivered, but that something does not meet the power consumption spec. Upon researchⁱⁱⁱ it turns out it's a most fortuitous event : BFL found some widely used but now obsolete high-end chips on the cheap, sanded off their backs and presto, manufactured "innovation".

On the strength of this impressive record BFL proceeds to a larger scam : ASICs. Because a company that failed to deliver FPGAs and was saved in extremis by a stroke of good fortune^iv is exactly the best candidate to do a foundry run for an entirely new product.

This bold announcement creates a flurry of "competition", and the involuntary humour that comes with that, of course. The main problem, however, is that taking money from alleged "customers" before the product you're selling exists is fraudulent and illegal. Not even a matter of the US being legally bonkers, it's illegal everywhere and fraudulent everywhere. What the BFL early birds are buying with their "pre-orders" is equity in the company, except they don't know how much exactly and never signed a term sheet.^v

There's just no way this little experiment in mishandling other people's money can end up anywhere other than in a court, and there's pretty good odds that it will be through penal rather than civil proceedings - the people involved are too many and too stupid for the state not to intervene.

Once that happens, I am positive and certain that the same people who are now running around calling their betters names will try to turn things into some sort of "mean state infringing on people's rights". They have a fine record at trying exactly that.^vi

The problem is, the lot of them being packed up and hauled to jail would be no such infringement. It is at this point perfectly reasonable and quite unavoidable. Sure, they'll try and sell this libertarian angle, that's the curse of being pro-freedom : all the scumbags try to exploit you for their little profit turning "ideas". It won't wash. The girl that already beat you in the PR marketplace will beat you again, dear Sonny & co. She has the material right here.

And more generally, a notice to all the scumbags circling BTC : I don't care that you're poor, I don't care if you're desperate, I don't care if you're 'Ndrangheta or the Gambinos or the Bonanos or the Russians or whoever the fuck else. Pack it and move. This is your only warning, and quite frankly I have no ideea why warnings are even necessary. Bitcoin is not for idiots. That means you.

1. " I've been involved in technology and libertarian focused ventures for most of my adult life. I believe very strongly in freedom, honesty and personal responsibility." in his own words. Indictment and other relevant material here. [↩]
2. By means of finding the logo on the Internet and either buying a defunct company or simply doing business in its name. Yes that later approach is both fraudulent and illegal. [↩]
3. Well summed up by Epoch a year ago,

   As for the 2 large chips with the sanded heat spreader, the best candidate seems to be an Altera Stratix III. Either the EP3SL200 or the EP3SE260. Yes, both of these 'retail' for several thousand dollars. But no one buys these now, and certainly not for retail prices. They are essentially 'end of life' 65nm parts. 2 generations old already. No one uses these for new designs anymore. Why do you think BFLs W/Mhps ratio of twice as bad as anyone using Spartan 6? Because Spartan 6 is a 45nm part, and BFL is using older and power-hungry 65nm parts. But BFL got lucky and found source of cheap, old, last-gen high-end chips. Someone willing to dump them for a low cost. Perhaps from a cancelled project.

   Anyway, pursuing this 'question' further is rather pointless. Technically, the answer is 'yes': BFL is using ASICs, but those 2 large chips aren't them. There isn't anything magical about those chips. They are old 65nm tech, but they are high-end. That is why they get the performance they do, but it is also why they use so much more power than any other current FPGA miner on a W/Mhps comparison.

   [↩]

4. Really, is it good fortune ? Or is it just the cold calculation that it's worth it to sink some thousands of dollars per chip into "delivering", especially seeing how the entire thing is really a loan - the very fools that you delivered to will give you back the chips later on as trade-ins. [↩]
5. Yes, this specifically and exactly means that if you paid for a "pre-order" and BFL ever delivers you can sue for an ownership stake, and you will probably win something. For that matter you can sue for a stake even if they never deliver anything, if you don't mind throwing more money out the window. [↩]
6. Their intellectual dishonesty is shocking, consider this exchange :

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   Sonny Vleisides
   

   ---

   I came to know my real father only as an adult. So when I got the opportunity to know him better, I was eager and curious. His name was James Ray Houston (the focus of the indictment). He was very charismatic and had a wild past from having ran for governor in Nevada. At one time he had a Lear jet with his picture on the tail. He'd gone broke and rich several times since and had a zillion GREAT stories to tell. I was completely enamored. At that time he had been building a business bundling lottery tickets and selling shares of ownership in their potential winnings. He moved to simply guaranteeing the ticket results on his own via re-insurance pools (US Patent application number US 2004/0058726 A1). At some point after that it became clear to him that he could use a sportsbook license to clarify legality and allow his customers to bet on the outcome of a lottery without buying a lottery ticket. So instead of "I bet the Giants win by 7", it's "I bet the NY Lottery pick 3 is 4-7-2". He built international lottery products like this and took them to market. I helped him.

   It was a roaring success. It's fair to say the US Government didn't like it much in spite of the legal basis. After several years, indictments suddenly rained down on all forms of offshore gaming.

   [...]

   After two and a half years preparing, we neared trial. The prosecutor calls for a meeting and offers me a deal. I can go home if I accept a single count of mail fraud and skip the trial. They would drop 23 charges and leave me with a simple postal violation (lesser count of mail fraud). I thought about it and it didn't take long for me to agree to get the shackles off. I signed and went home to my Mother's house in Kansas City. I sat there looking at the wall for a long time. I didn't feel like leaving the house much. It was difficult to get over the emotional loss. My life was ruined. Mom got me an account on match.com and encouraged me to date. I met a wonderful girl and we had a little boy. We named him Indy. My life continued and I started to look for a new project to begin again. A fresh start. I'm on a good track now, trying to put the past behind me.

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   My PR
   

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   The case went all the way to the Italian Supreme Court.

   This is no place to be vague. Either link to the case documents already available online or put them online and link to them.

   Yes.. really. This is no joke. It's called the federal sentencing guidelines implemented in 1984. It's the point system that determines the sentence, not the judge. My points totaled 43. Life in prison. Look it up and prepare to be amazed.

   It's not a matter of it being a joke, it's a matter of it being a lie that's under consideration. I am looking it up, I still fail to see how a first conviction for fraud amounts to life without parole. Again, this is no place to be vague, you are the convicted felon, not us. Do your homework, don't expect us to do it for you.

   In general, yes the US Govt is a despicable piece of shit, always looking to hassle and possibly convict perfectly innocent bystanders on trumped up charges. Cases such as Dominique Strauss Kahn or Julien Assange readily spring to mind. However, this does not mean that every two bit fraudster is now a political target. It's an age old ploy, of course, that's how the couple forgers imprisoned in the Bastille got themselves out in 1789.

   Nice tearjerker with the orphan kid meeting Dad and so forth. Please apply yourself more diligently to the actual points.

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   Sonny Vleisides
   

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   Thank you all for your comments... both positive and negative. I see many of our competitors in this thread pushing their agenda which isn't surprising but still, there are some very reasonable posts with deserving questions. Overall, I appreciate the public's reason for concern and I will return and provide answers.

   *crickets*

   What's four months, right Sonny ? "We have a story, if it sticks all the better, if it doesn't we walk away, try a different story on a different street corner", right Sonny ? [↩]