TOWN HALL (prep) Meeting: Butterfly Labs

[psilan]

Today's town hall (prep)meeting is about Butterfly Labs http://www.butterflylabs.com/

This thread serves to gather questions that you have about the company, it's products, it's owners, it's staff, whatever you desire.
I am sure BFL will answer selectively, but we have an acceptance from BFL Josh (or Inaba) to answer these questions via a media type that has not yet been decided.

It has come about specifically from the quotes below, but could serve a wider purpose as i'm sure Inaba must feel like a parrot sometimes.
If people ask repeat questions, send them here.

Sonny Vleisides is associated with BFL and it's the same Sonny listed in the case documents.  He was involved in off shore gaming in the capacity of selling and providing software engineering to companies that did the actual offshore gaming (there is even a US patent application for the process). The industry came under attack (as we all remember) around that time, and Mr. Vleisides was caught up in the process as well as a good portion of the industry based in Costa Rica.

Although this may be cause for concern to some, the fact is that we're a robust company with 22 employees.  One of them has a colorful background in offshore libertarianism.  If I thought there was even the possibility of something unsavory going on within BFL, you can rest assured I would a) not be part of it and b) would let everyone know it.

The reality is, we are legitimate, we have released revolutionary products and we are going to release more revolutionary products.  I was made aware of this back story prior to my employment and I evaluated it and concluded that it was immaterial to the business at hand and thus joined BFL.  There was nothing hidden from me and Sonny has always answered questions and been completely open about his past, but I think we can all agree that it's not something you just announce to the world.

From the extradition warrant.
http://www.scribd.com/doc/106417808/Affidavit-for-Extradition-Warrant

5.   A joint investigation involving the IRS-CID and the United States Postal Inspection Service (USPIS), revealed that from at least 1990 through July 2006, SONNY VLEISIDES, James Ray Houston, Dennis Emmett, William Cloud, Henry Walther, Scott Henry Walther, and others committed a massive international lottery scam using the following company names: Shamrock Agency, German Swiss Group, World Expert Fund, Mutual Medical Insurance Co, Old Amsterdam Trust Co, Euro American Fax Co, European Union Commission, EU American Payment Co, Global Search Network, North American Foreign Payments Services, Wor'dwide Verification Service, and others. VLEISIDES ran the scheme along with Houston and Emmett. VLEISIDES, Houston and Emmett, who were all located in Costa Rica, worked with mailing houses which, at the direction of VLEISIDES, Houston, and Emmett, sent out tens of thousands of mailings to victims in the United States, many of whom were elderly. The mailings contained false statement
 s, half truths, and omissions, and induced the victims to participate in various international lotteries, falsely stating that if the victims participated, they were guaranteed to win or had a very good chance to win. The mailings directed the victims to send their money to Ireland, at d the Netherlands, among other locations, where William Cloud had set up addresses with commercial mail receiving agencies and individuals to forward the money, eventually, back to the United States. After receipt at the commercial mail receiving agencies, the victims' money was sent to Henry Walther, who, along with his son Scott Henry Walther, deposited the money into various bank accounts and then distributed it as directed by VLEISIDES, Houston, and Emmett. Some of the money was spent on furthering the criminal activity. Some of the money was paid out to victims in small-dollar checks that the co-schemers misrepresented to be lottery winnings. The rest of the money was paid out to the co-s
 chemers and others for their own use. VLEISIDES and the other defendants did not buy any lottery tickets, and the vast majority of the victims lost the money they sent. The total loss from the scheme is in excess of $19 million.

For the town hall, what about IRC or is that too esoteric for a lot of people?  And when?  I will absolutely make this happen ASAP if we can agree on a time and place.

If we could keep it civil that would be great. Short to-the-point questions will be posted below and answered by BFL using the media that is decided upon.
We don't need any Internet sleuths looking for more information. The link above provides enough.

2 replies below this are reserved. One for BFL to say whatever they wish as an intro, the other for questions. Questions will not be quoted. PM your question if you wish to remain anon.

In case this matters to anybody: I am not associated with BFL in any way other than being a first time customer with one ASIC SC order. I once asked for a paid sig but was ignored! It's all about the btcjamins baby!!!

[psilan]

Placeholder for BFL introduction;

Hey man,

Here's the intial response from Sonny.  We are trying to get him out of newbie jail, just waiting on Theymos to fix the account.  But might as well post this in your second space:

Hello, my name is Sonny Vleisides.  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.

I decided to drop university studies at UMKC back in 1991.  My mother wasn't very happy about it, but with youthful ambition and no sense, I set out to travel the world instead.  I've lived in Russia, Indonesia, Latin America, Europe etc...  Mostly seeking opportunity while trying to learn what I could.  Along the way, libertarian ideals became more interesting than any other and looking back, it's clear that's the attraction that's pulled me through life from one focus to the next.  The internet was an exciting development.  I started webspawner.com in 1995.  It was my focus for many years.  Do a search for 'free webpages' on google.  I'm currently president of that company, not BFL.

In the late 90's, I found myself face to face with a great new concept.  It was called jurisdictional arbitration.  That's where you're able to leverage technology to profit from differences in law from one jurisdiction to another. The hotbed of it was in offshore gaming where a Costa Rican license could be used along with satellite telecommunications to offer gaming services to clients all over the world, even in the United States.  I thought this was pretty cool, so I started a software company to provide the back end for these systems.  We operated services as Sportsbook Solutions and the SportsPulse platform.  It was a lucrative and fun time.  I saw it as a libertarian adventure in challenging the authorities of the world while earning a good living.

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 Pattent application number US 2004/0058726 A1).  At some point after that it became clear to him that he could use my company's software system and 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".

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.

That year (2007), about 30% of the larger offshore sportsbook/poker/lottery gaming companies were indicted with mail fraud and money laundering related accusations including betonsports.com, sportsbook.com, sportingbet plc.  Later it was Bookmaker.com, 2Betsdi.com, Funtimebingo.com, Goldenarchcasino.com, Truepoker.com, Betmaker.com, Betgrandesports.com, Doylesroom.com, Betehorse.com, Beted.com....  and many more.

Each case was different and this one was particularly unusual because it wasn't a standard sportsbook model.  In fact, this case was started by the IRS.  Why the IRS?   It's not my place to say, but it's worth any reader taking a moment to think about.  The core of their argument was that if a customer didn't buy the ticket from the government, then they were being victimized.  Consequently, all economic activity by James Houston's company was fraudulent and this forms the basis of their indictment and fraud accusations.  The customers bought tickets and were paid their winnings as promised.  Only the government lost out.  This made the case hard to prosecute.  In fact, the government ended the case without any obligation to repay anyone anything.  No restitution.

My role was mostly as a software & license supplier, However, I was involved enough in the company that my name was included in the indictment.  Later this role distinction would become an important factor.

Everything was fine until one day I was picked up while traveling in Florence.  It was a sealed indictment, so I had no idea what was going on.  I spent the next two years fighting extradition.  The case went all the way to the Italian Supreme Court.  In the end, I was extradited after the US was made to drop half of the charges.  That's all they could do for me, but they really helped.  I'll always be thankful to Italy for that.

In the US, I was preparing for my case.  It had been a long slog.  My finances had dwindled to zero, leaving me with a free court appointed lawyer from the legal pool.  He showed me that the US federal system had a 97% conviction rate...  higher than the Russian courts under Stalin.  He calmly informed me that I was facing full life without possibility of parole as a first time white collar defendant.

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.

At the last minute, the prosecution calls for a meeting and tells me I can go home if I accept a single count of mail fraud.  They would drop 23 charges and leave me with a simple postal violation (lesser count of mail fraud).  After two and a half years, I thought about it and agreed.  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 life again.  A fresh start.  I'm on a good track now, trying to put the past behind me.



Somewhere along the way, I got involved with the BFL project.  (No one from the indictment is involved in this company, in fact two of them have since died including my father.)  With regards to BFL, I'm proud to have played a role in it's start up and focus on the current products, but I am not a majority owner.  The company has 22 employees who are all dedicated and focused on delivering a truly amazing best in class product.

The bitcoin community and it's success are important to me and my past are not a threat to it or to the BFL corporation.  I hope you can see that.

Thanks for your time in reading this.

Kind regards,
Sonny Vleisides

[psilan]

Questions area. Note again, these are not quoted.
Any slights, or digs, in any context will be trimmed down to the black and white question.


1: Is Sonny Vleisides the BFL employee who signs his emails "Sonny K?" Why the K?

2: Did Sonny Vleisides found the company or is he merely an employee?

3: Of those 22 employees, are any of their names: James Ray Houston, Rex Rogers, Dennis Emmett, William Cloud, Henry Walther, Scott Henry Walther, PJ Swink, or Michael Swink?

4: What other surprises will people find if they dig further?

5: Who are the owners of BFL? Does Sonny own 100% or is it shared between him and others? (E.g. VCs)

6: Given these conditions of his parole, is Sonny able to produce evidence that he has the permission of his probation officer to undertake BFL activities?
_{(address 3, 14 of http://ca.findacase.com/research/wfrmDocViewer.aspx/xq/fac.20100915_0004129.CCA.htm/qx)}

7: How quickly can you prove the preorders are legitimate and not a preorder scam? And how can you do this?

8: Can you provide the company details (registered trademarks, registered business etc)?

9: Who is the treasurer/CFO? How are preorder and order funds looked after (do they stay in the company?) and are they converted to another currency?

10: Does Sonny still hold offshore accounts and do any BFL funds transfer to them?

11: When did he find out about bitcoin and how did his interest develop in to this? Is it related to his Laissez Faire City, James Orlin Grabbe and KGB ties?

12: Can you shred any light around the chip sandpapering? Will this continue with ASIC chips?

13: You say your only involvement was your software your company being used by your father, but testimony shows you directly involved with mailouts, and you also covered your name. Can you elaborate?

14: Are you saying the lottery tickets existed in all cases?

15: BFL originally stated they were not going to mine with the devices. Now we have Inaba/BFL_Josh stating they will 24 hour mine (burn in) with each device on a live network. Is BFL a producer or a miner now? Or just profit gouging?

16: Your story just doesn't match the affidavit at all. Why the huge difference?

17: Did BFL design the FPGA chip from scratch or use "altera atratix3 EP3SL150F780 FPGA" chip?

[dust]

As both a satisfied BFL customer and someone paranoid towards scams, I am glad to see this occurring.

[Puppet]

Wow. Didnt see this coming. I guess this is the same guy:

http://ca.findacase.com/research/wfrmDocViewer.aspx/xq/fac.20100915_0004129.CCA.htm/qx

Pursuant to the Sentencing Reform Act of 1984, it is the judgment of the Court that the defendant, Sonny Vleisides, is hereby committed on Count 1 of the 23-Count Indictment to the custody of the Bureau of Prisons to be imprisoned for a term of 26 months, which shall be deemed satisfied by time already served in custody in this matter, taking into consideration the time period that the defendant served in custody from the time of his arrest in Italy in April 2007 until his extradition to the Central District of California in February 2009, and the time period in custody from his arrival in this district in February 2009 until his release on bond

I dont think this proves BFL is a scam, particularly given their current track record of actually delivering (albeit late) state of the art miners,  but it sure would make me think twice about preordering their asics.

[ice_chill]

Even if it is the same guy, have you thought that people change ?
Can anyone truthfully say that they are a saint that have never committed a single crime ?

Also just because you were never caught, does not mean you never committed a crime or scam, maybe some of the other ASICs producers committed even greater crimes and scams but were not caught for them.

[CleverMiner]

Even if it is the same guy, have you thought that people change ?
Can anyone truthfully say that they are a saint that have never committed a single crime ?

Also just because you were never caught, does not mean you never committed a crime or scam, maybe some of the other ASICs producers committed even greater crimes and scams but were not caught for them.

Yes people change and have the right to do so.

Ps: No need to bring the other asics makers into this.

[mrb]

Who are the owners of BFL? Does Sonny own 100% or is it shared between him and others, eg. the venture capitalists mentioned in the ASIC press release?

I understand that BFL, as a private corporation, is under no obligation to answer these questions, so thanks for doing the town hall.

[kaerf]

what role does sonny currently play within bfl?

what is his level of involvement and influence at the company?

[Bitcoin Oz]

Is sonny going to make his previous victims whole ?

[repentance]

Just posting this here as evidence that (Sonny) Chris Vleisides is listed as President/Director of the company on documents filed with the Wyoming Secretary of State, in case there's any attempt to pass him off as a minor employee.

https://wyobiz.wy.gov/Business/FilingDetails.aspx?eFNum=149144214231010201167112190255028042109060235081

Click on the "Parties" tab.

Given these conditions of his parole, it is reasonable to ask Sonny to produce evidence that he has the permission of his probation officer to undertake BFL activities.

3. The defendant shall not engage, as whole or partial owner, employee or otherwise, in any business involving loan programs, gambling or gaming activities, telemarketing activities, investment programs or any other business involving the solicitation of funds or cold-calls to customers without the express approval of the Probation Officer prior to engagement in such employment. Further, the defendant shall provide the Probation Officer with access to any and all business records, client lists and other records pertaining to the operation of any business owned, in whole or in part, by the defendant, as directed by the Probation Officer;

14. as directed by the probation officer, the defendant shall notify third parties of risks that may be occasioned by the defendant's criminal record or personal history or characteristics, and shall permit the probation officer to make such notifications and to conform the defendant's compliance with such notification requirement;

http://ca.findacase.com/research/wfrmDocViewer.aspx/xq/fac.20100915_0004129.CCA.htm/qx

If Sonny's probation officer knew that BFL was soliciting funds and did not direct him to notify BFL users as per 14, the question of why needs to be answered.  That's a pretty significant oversight.

[psilan]

Is sonny going to make his previous victims whole ?

That's what the justice system is supposed to do.

[jojo69]

popcorn

[Bitcoin Oz]

Is sonny going to make his previous victims whole ?

That's what the justice system is supposed to do.

Ripping off little old ladies then being free and clear to raise millions of dollars while his victims live off noodles because he stole their pension money isn't justice at all.

[psilan]

I agree. I feel very sorry for the people who have been conned. But you have a justice system, and the system punished. Technically the victims and the public won. :/

[nedbert9]

Let's not let the main-net "QC" issue slide.  For those out of the loop on this.  Recent admission that all BFL equipment, and no different guidance for ASICs, have been QC'ed on main-net.

Why?  

1.  ASIC is a game changer.

ASIC is a tech shift that completely changes the repercussions of QC testing on main-net.  BFL will produce and test in large batch quantities (first shipment).

With ASIC ramp up, any QC activity of ASIC on main-net would establish BFL as a competitor to the mining community.
Using an estimation of 20 TH produced in bulk and QC'ed on main-net in one months time would equate to approx. $80,000 of mining profit. (600GH+ in QC activity per day)

2.  BFL stated in the past that main-net would not be used for QC.  Furthermore, the quote, "We are hardware enthusiasts.  We are not interested in mining bitcoin," only supports this.

How can this not be described as a credibility issue?

3.  BFL claims technical challenges that prevents QC activities on non production/main-net.

Inaba/Josh's latest rebuttal is that test-net is not appropriate for testing in that the core dev's have requested no mining testing on test-net to keep difficulty low.
Inaba/Josh has asked the community to, "do their own research," as to why test-net can't be used.  Interesting PR tactic.

Dev's have been consulted and the fact that an isolated test-net can be created, by anyone, for the explicit purpose of testing mining hardware has been confirmed.

Again, is this a credibility issue?


4.  BFL-Miner relationship.  Is BFL a vendor or a competitor?

There are two arguments to this.  One, which is not my position, is that BFL could use this opportunity to add profit and then pass along savings to customers in the form of lower unit price points.
BFL has never set expectations within the community that unit cost would be influenced at all by BFL self mining profit.  In the current market, one that has been without serious ASIC competition, there is no market justification (competitive pressure) to translate any self mining profits to customer savings by lower unit costs.  In principle, this is a valid argument.  In context with the current market the argument fails.

The other argument, one that casts this development in the worst light, is that if BFL generates a mining profit on the equipment prior to customer delivery an unexpected profit extraction from the mining community has occurred.  By extension one could argue that BFL's products are now more expensive for the customer.

[jjshabadoo]

This is a great exercise, I just hope people stay the course and realize this is not just, " someone did something wrong in the past let's forget about it. "

The guy pulled a multi-million dollar scam and people here and elsewhere have invested hundreds of thousands of dollars in upfront money which can be EASILY stolen since the bulk of it is in BTC.

I have heard many of the same excuses so far in this matter which were used to justify pirate40's behavior. Stop being so naive and understand this is not just someone getting arrested in the past for a minor crime.

Any legitimate business owner would have to answer to this in the real world.

I hope it works out and if BFL has good intentions then this should end the criticism's of their company once and for all.

[BitcoinINV]

Wow great information, I will be following this and the release of BFL.

[MrTeal]

Given the following condition of Sonny's parole (emphasis mine):

3. The defendant shall not engage, as whole or partial owner, employee or otherwise, in any business involving loan programs, gambling or gaming activities, telemarketing activities, investment programs or any other business involving the solicitation of funds or cold-calls to customers without the express approval of the Probation Officer prior to engagement in such employment. Further, the defendant shall provide the Probation Officer with access to any and all business records, client lists and other records pertaining to the operation of any business owned, in whole or in part, by the defendant, as directed by the Probation Officer

Has Sonny/BFL provided his probation officer with any business records or client lists related to Butterfly Labs, and/or has his probation officer asked for such information?

If Sonny is found to be in violation of his parole or if the courts decide that his stake in BFL is unacceptable, is there a succession plan in place to ensure the continued operation of BFL?

[Desolator]

Why is there no registered business or trademarks in Missouri for Butterfly Labs, BFL, anything similar to that and the word "Bitforce" doesn't appear in any patent or trademark registration?  Also why is your website protected by a privacy registration company, you use a PO box, and you use a difficult to trace Sprint mobile number for all calls and faxes?

I know you don't want people finding out where your facility is and breaking into it and stealing lots of ungodly expensive chips and a security system to stop that would cost a fortune but it's also good in the bitcoin world to prove that you exist and that it's where you say you exist, especially with a company employee or owner or whatever having a criminal background including fraud.