Defendant BF Labs states the following for its affirmative defenses to Plaintiffs’ Complaint:

1. Plaintiffs’ claims are barred as Plaintiffs accepted the terms of their pre-order and
understood that all sales were final and that there was a backlog of orders and production and
delivery of any order may take two months or longer.

2. Plaintiffs’ claims are barred because BF Labs “FAQ” website states it reserves
“the right to handle refund requests on a case by case basis” and pre-ordered products are nonrefundable
as is clearly stated at the time of purchase.

3. Plaintiffs’ claims are barred because Plaintiffs understood that deliveries may take
two months or more after order.

4. Plaintiffs’ claims are barred because Plaintiffs expressly agreed to a pre-order
arrangement, knowing delay would be two months or longer and BF Labs was unable to make
any representation regarding the length of delay.

5. Plaintiffs’ claims are barred as the products in question are designed and
manufactured in accordance with the standards in the industry.

6. Plaintiffs’ claims are barred because the products in question underwent burn
testing for a minimal amount of time and had not be assigned to a customer order at the time of
the burn testing.

7. Plaintiffs’ claims are barred because untested products are not finished goods and
could not be customers’ equipment.

8. Plaintiffs’ claims are barred pursuant to K.S.A. 84-2-501, in that the products in
question were not identified in any contract at the time of the pre-order.

9. Plaintiffs’ claims are barred because burn testing was done to warrant the product
as fit and suitable for the purposes for which it is sold.

10. Plaintiffs’ claims are barred because BF Labs exercised reasonable care to prevent
and promptly correct any delays that Plaintiffs complains of.

11. Plaintiffs’ alleged damages request cannot be sustained as unconscionable.

12. Each and every claim contained in Plaintiffs’ Complaint fails to state a claim upon
which relief can be granted.

13. Plaintiffs’ claims for damages are barred in whole or in part because Plaintiffs
have suffered no damages.

14. Plaintiffs’ claims are barred in whole or in part based on the doctrine of election
of remedies.

15. Plaintiffs’ claims are barred by reason of Plaintiffs’ breaches or failures to perform
conditions precedent or subsequent.

16. Plaintiffs’ claims are barred for the reason that any actions or inactions of BF
Labs were economically justified.

17. Plaintiffs’ claims are barred by reason of Plaintiffs’ unclean hands.

18. Plaintiffs’ alleged damages, which are denied, were caused by intervening and
superseding acts over which BF Labs had no control or right of control, thereby barring or
diminishing Plaintiffs’ alleged right of recovery.

19. The damages claimed by Plaintiffs are not recoverable, in whole or in part, under
Kansas or federal law.

20. Plaintiffs’ claims are barred by a prior settlement and/or release of those claims or
are barred to the extent Plaintiffs have entered into an accord and satisfaction or otherwise
compromised their claims.

21. In further answer to Plaintiffs’ Complaint and by way of Affirmative Defense,
Defendant adopts all Affirmative Defenses available to it under the Kansas Uniform Commercial
Code or any other Uniform Commercial Code enacted by a state whose substantive law controls
in this action.

22. Defendant’s actions were neither the cause in fact nor the proximate cause of
Plaintiffs’ injuries, if any.

23. Defendant is entitled to the benefit of all defenses and presumptions contained in,
or arising from, any product liability act and/or Kansas Uniform Commercial Code.

24. The alleged damages sustained by Plaintiffs were the result of Plaintiffs’ own
comparative fault or any other “fault” pursuant to K.S.A. 60-258a and, accordingly, Plaintiffs are
barred from recovery or limited in their recovery.

25. Plaintiffs’ claims are barred, in whole or in part, by the equitable doctrines of
waiver and estoppel.

26. Plaintiffs’ claims are barred by the doctrine of justification.

27. Plaintiffs’ claims are barred, in whole or in part, by the doctrine of ratification.

28. Plaintiffs’ claims are barred by all applicable statutes of limitation.

29. Plaintiffs’ claims are barred, in whole or in part, pursuant to First Amendment of
the United States Constitution and similar applicable state constitutional provisions.

30. Plaintiffs’ claims are barred by the doctrine of spoliation and the failure to
properly preserve evidence necessary to the proper and just determination of this action.

31. Plaintiffs’ claims are barred to the extent Plaintiffs entered into an accord and
satisfaction or otherwise compromised their claims.

32. Plaintiffs’ claims are barred by the doctrines of repudiation and anticipatory
breach.

33. Plaintiffs’ claims are barred to the extent Plaintiffs prevented BF Labs from
performing.

34. Plaintiffs’ claims are barred based on Plaintiffs’ rejection of goods, as well as
Plaintiffs’ revocation of acceptance of goods.

35. Plaintiffs’ claims are barred by the doctrine of mistake.

36. Plaintiffs have failed to mitigate their damages, if any, or otherwise take
reasonable steps to minimize or prevent the damages Plaintiffs claims to have suffered. Plaintiffs
also, once they realized a claim existed, were under an obligation to minimize their alleged loss,
if any. As a result, any recovery against Defendant should be barred, reduced, or offset
accordingly.

37. Plaintiffs’ damages should be reduced as an offset by any amount received by any
other payment to mitigate damages.

4. BF Labs admits the allegations contained in paragraph 4 of the Complaint.

4. Defendant BF Labs, Inc. is a Wyoming corporation with its principal place 
of business at 10770 El Monte St., #101, Leawood, Johnson County, Kansas.

5. BF Labs admits the allegations contained in paragraph 5 of the Complaint.

5. Defendant is registered to do business in the State of Kansas and 
maintains a registered agent at 112 SW 7th Street, Suite 3C, Topeka, Kansas.

8. BF Labs admits the allegations contained in paragraph 8 of the Complaint.

8. Defendant advertises itself to the public as a manufacturer of specialized 
computer equipment and processors for the task of mining bitcoins. 


9. BF Labs admits the allegations contained in paragraph 9 of the Complaint.

9. Bitcoin is a peer-to-peer payment system and digital currency created in 
2009. Unlike traditional currency, bitcoins are not issued by a government or central 
banking authority.
 

10. BF Labs admits the allegations contained in paragraph 10 of the Complaint

10. Bitcoin is considered a “cryptocurrency” because cryptography is used to 
control the creation and transfer of the currency, creating a distributed, decentralized, 
and secure medium of exchange. 


11. BF Labs admits the allegations contained in paragraph 11 of the Complaint.

11. Bitcoins are regularly used to pay debts, purchase goods and services, and 
are exchanged for other currencies such as the U.S. dollar, U.K. pound sterling, or euro. 
For example on March 19, 2014, one bitcoin could be exchanged for an average of 
$613.12. 


12. BF Labs admits the allegations contained in paragraph 12 of the Complaint.

12. Bitcoins are created by “mining”, a process where “miners” receive 
transaction fees and newly minted bitcoins in return for verifying and recording 
payments into a public ledger. 


14. BF Labs admits the allegations contained in paragraph 14 of the Complaint.

14. As the difficulty of Bitcoin mining has increased over time, the computer 
hardware required to profitably mine has advanced from general purpose CPUs (found 
in common desktop computers), high-end GPUs (often found in gaming computers), 
FPGAs (field-programmable gate arrays), and ultimately to ASICs (application-specific 
integrated circuits) purpose built for performing the calculations necessary for Bitcoin 
mining. 


16. BF Labs admits the allegations contained in paragraph 16 of the Complaint.

16. At the time of the formation of Defendant through the present, Mr. 
Vleisides was serving a term of supervised release for a felony conviction for Mail Fraud, 
in violation of 18 U.S.C. § 1341, in the United States District Court for the Central 
District of California.

17. BF Labs admits the allegations contained in paragraph 17 of the Complaint.

17. Defendant using the name “Butterfly Labs” advertised for sale via the 
Internet a variety of ASIC based Bitcoin mining hardware, stating “Butterfly Labs 
manufactures a line of high speed encryption processors for use in bitcoin mining, 
research, telecommunication and security applications”. 


21. BF Labs admits the allegations contained in paragraph 21 of the Complaint.

21. Defendant represented its Bitcoin mining products were “in production” 
and “real”.

31. BF Labs admits the allegations contained in paragraph 31 of the Complaint.

31. In or about 2012, Defendant purchased a business known as “Eclipse 
Mining Consortium”, which operates as a Bitcoin mining pool, an organization which 
permits the combination of Bitcoin mining efforts to offer participants faster, yet 
smaller, bitcoin distributions than would be achievable if the participants conducted 
mining operations on their own. 


34. BF Labs admits the allegations contained in paragraph 34 of the Complaint.

34. Defendant has collected millions of dollars from customers for pre-orders 
of Bitcoin mining hardware. 


35. BF Labs admits the allegations contained in paragraph 35 of the Complaint.

35. Prior to discontinuing Defendant’s ability to accept payments through the 
service, Paypal alone had processed over $11 million dollars in pre-payments for 
Defendant’s hardware.

38. BF Labs admits the allegations contained in paragraph 38 of the Complaint.

38. In June of 2013, Plaintiff Kyle Alexander ordered a Bitcoin mining 
machine from Defendant. 


39. BF Labs admits the allegations contained in paragraph 39 of the Complaint.

39. Plaintiff Kyle Alexander paid $308.00 to Defendant via PayPal for this 
equipment.

46. BF Labs admits the allegations contained in paragraph 46 of the Complaint.

46. Since Plaintiff Kyle Alexander pre-paid for his order of mining equipment 
from Defendant in June of 2013, numerous bitcoins have been mined by others, and the 
difficulty of mining new bitcoins has substantially increased over such time.

47. BF Labs admits the allegations contained in paragraph 47 of the Complaint.

47. On April 3, 2013, Plaintiff Dylan Symington ordered a Bitcoin mining 
machine from Defendant.

48. BF Labs admits the allegations contained in paragraph 48 of the Complaint.

48. Plaintiff Dylan Symington paid $1,333.00 to Defendant via PayPal for this
equipment.

51. BF Labs admits the allegations contained in paragraph 51 of the Complaint.

51. Nearly seven months after receiving payment, on November 1, 2013, 
Defendant shipped mining equipment to Plaintiff Dylan Symington.

59. BF Labs admits the allegations contained in paragraph 59 of the Complaint.

59. In pertinent part, the Kansas Consumer Protection Act, K.S.A. § 50-626 
provides: 
No supplier shall engage in any deceptive act or practice in 
connection with a consumer transaction[.] 


60. BF Labs admits the allegations contained in paragraph 60 of the Complaint.

60. In pertinent part, the Kansas Consumer Protection Act, K.S.A. § 50-627 
provides: 
No supplier shall engage in any unconscionable act or 
practice in connection with a consumer transaction. 


61. BF Labs admits the allegations contained in paragraph 61 of the Complaint.

61. Defendant is a manufacturer, distributor, dealer, seller, lessor, assignor, or 
other person who, in the ordinary course of business solicits, engages in or enforces 
consumer transactions, and is therefore a “supplier” as defined in K.S.A. § 50-624(l).

64. BF Labs admits the allegations contained in paragraph 64 of the Complaint.

64. The Kansas Consumer Protection Act, K.S.A. § 50-634 provides for a 
private right of action for “a consumer who is aggrieved by a violation of this act.” 


76. BF Labs admits the allegations contained in paragraph 76 of the Complaint.

76. A benefit was conferred on Defendant in that Plaintiffs paid money and/or 
bitcoins to Defendant

Defendant BF Labs states the following for its affirmative defenses to Plaintiffs’ Complaint:

1. Plaintiffs’ claims are barred as Plaintiffs accepted the terms of their pre-order and
understood that all sales were final and that there was a backlog of orders and production and
delivery of any order may take two months or longer.

2. Plaintiffs’ claims are barred because BF Labs “FAQ” website states it reserves
“the right to handle refund requests on a case by case basis” and pre-ordered products are nonrefundable
as is clearly stated at the time of purchase.

3. Plaintiffs’ claims are barred because Plaintiffs understood that deliveries may take
two months or more after order.

4. Plaintiffs’ claims are barred because Plaintiffs expressly agreed to a pre-order
arrangement, knowing delay would be two months or longer and BF Labs was unable to make
any representation regarding the length of delay.

5. Plaintiffs’ claims are barred as the products in question are designed and
manufactured in accordance with the standards in the industry.

6. Plaintiffs’ claims are barred because the products in question underwent burn
testing for a minimal amount of time and had not be assigned to a customer order at the time of
the burn testing.

7. Plaintiffs’ claims are barred because untested products are not finished goods and
could not be customers’ equipment.

8. Plaintiffs’ claims are barred pursuant to K.S.A. 84-2-501, in that the products in
question were not identified in any contract at the time of the pre-order.

9. Plaintiffs’ claims are barred because burn testing was done to warrant the product
as fit and suitable for the purposes for which it is sold.

10. Plaintiffs’ claims are barred because BF Labs exercised reasonable care to prevent
and promptly correct any delays that Plaintiffs complains of.

11. Plaintiffs’ alleged damages request cannot be sustained as unconscionable.

12. Each and every claim contained in Plaintiffs’ Complaint fails to state a claim upon
which relief can be granted.

13. Plaintiffs’ claims for damages are barred in whole or in part because Plaintiffs
have suffered no damages.

14. Plaintiffs’ claims are barred in whole or in part based on the doctrine of election
of remedies.

15. Plaintiffs’ claims are barred by reason of Plaintiffs’ breaches or failures to perform
conditions precedent or subsequent.

16. Plaintiffs’ claims are barred for the reason that any actions or inactions of BF
Labs were economically justified.

17. Plaintiffs’ claims are barred by reason of Plaintiffs’ unclean hands.

18. Plaintiffs’ alleged damages, which are denied, were caused by intervening and
superseding acts over which BF Labs had no control or right of control, thereby barring or
diminishing Plaintiffs’ alleged right of recovery.

19. The damages claimed by Plaintiffs are not recoverable, in whole or in part, under
Kansas or federal law.

20. Plaintiffs’ claims are barred by a prior settlement and/or release of those claims or
are barred to the extent Plaintiffs have entered into an accord and satisfaction or otherwise
compromised their claims.

21. In further answer to Plaintiffs’ Complaint and by way of Affirmative Defense,
Defendant adopts all Affirmative Defenses available to it under the Kansas Uniform Commercial
Code or any other Uniform Commercial Code enacted by a state whose substantive law controls
in this action.

22. Defendant’s actions were neither the cause in fact nor the proximate cause of
Plaintiffs’ injuries, if any.

23. Defendant is entitled to the benefit of all defenses and presumptions contained in,
or arising from, any product liability act and/or Kansas Uniform Commercial Code.

24. The alleged damages sustained by Plaintiffs were the result of Plaintiffs’ own
comparative fault or any other “fault” pursuant to K.S.A. 60-258a and, accordingly, Plaintiffs are
barred from recovery or limited in their recovery.

25. Plaintiffs’ claims are barred, in whole or in part, by the equitable doctrines of
waiver and estoppel.

26. Plaintiffs’ claims are barred by the doctrine of justification.

27. Plaintiffs’ claims are barred, in whole or in part, by the doctrine of ratification.

28. Plaintiffs’ claims are barred by all applicable statutes of limitation.

29. Plaintiffs’ claims are barred, in whole or in part, pursuant to First Amendment of
the United States Constitution and similar applicable state constitutional provisions.

30. Plaintiffs’ claims are barred by the doctrine of spoliation and the failure to
properly preserve evidence necessary to the proper and just determination of this action.

31. Plaintiffs’ claims are barred to the extent Plaintiffs entered into an accord and
satisfaction or otherwise compromised their claims.

32. Plaintiffs’ claims are barred by the doctrines of repudiation and anticipatory
breach.

33. Plaintiffs’ claims are barred to the extent Plaintiffs prevented BF Labs from
performing.

34. Plaintiffs’ claims are barred based on Plaintiffs’ rejection of goods, as well as
Plaintiffs’ revocation of acceptance of goods.

35. Plaintiffs’ claims are barred by the doctrine of mistake.

36. Plaintiffs have failed to mitigate their damages, if any, or otherwise take
reasonable steps to minimize or prevent the damages Plaintiffs claims to have suffered. Plaintiffs
also, once they realized a claim existed, were under an obligation to minimize their alleged loss,
if any. As a result, any recovery against Defendant should be barred, reduced, or offset
accordingly.

37. Plaintiffs’ damages should be reduced as an offset by any amount received by any
other payment to mitigate damages.

38. BF Labs reserves the right to amend its Answer to assert additional defenses,
affirmative or otherwise, that may arise or become known through the course of further
investigation or discovery.