Butterfly Labs

[charleshoskinson]

After much discussion on this forum regarding the business practices of Butterfly labs [BFL], it has become clear to me that there are several unanswered questions. Should BFL not commit to a ship date for their ASICs by the end of April and independent members of this community verify that they have received the product they ordered, I will draft an open letter to BFL. Its purpose is to determine the following:

• When did BFL have a working prototype of at least one of the ASIC products and how did they infer their engineering claims for both performance and power consumption?
• Will BFL consent to an independent audit of their corporation accounts?
• Did BFL finance (in part or fully) the development of their product line from preorders?
• Who is currently fabricating the chips within their products and can BFL produce on demand the contract signed with said fabricator?
• What is BFL's estimated shipping volume for ordered units per month
• How was BFL able to sustain itself during the delays?
• Has BFL engaged in mining and if so for how long and to what extent?

This list is a starting point. I'd like the engineers, accountants and legal professionals in this community to chime in to contribute their concerns. We have a duty to self-regulate and root out fraud where it occurs. Many people here have invested in BFL products and this forum runs ads.

[glendall]

Think it's all been said many times. Much of those bullets above can be found with some forum searching. At this point I think it's just up to customers to either get a refund for their 'pre-order'  (aka a good faith investment in the development of product that didn't exist) or just continue to wait another 1.5 / 2 months when they are making the products finally, in bulk.

[charleshoskinson]

(aka a good faith investment in the development of product that didn't exist

This is not necessarily true. Almost all legitimate companies accept preorders only when they have a clear concept that the finished product is within some scope of completion. Delays can certainly occur, but not in the years and not so far outside spec. The wattage spec increased by an order of magnitude. This isn't something that is common from prototype to finished product unless they didn't have one when they were accepting preorders. That's fine, but they have a legal obligation to inform those ordering that their orders are going to fund the creation of a completely new product. This would be a kickstarter project.

 It has entered the realm of possibility that BFL is actually a ponzi scheme. We as a community need to determine this quickly.

[glendall]

That's valid; sounds reasonable.  I don't have any pre-orders myself so maybe I'll just not get involved in these threads...

[Minor Miner]

It has entered the realm of possibility that BFL is actually a ponzi scheme. We as a community need to determine this quickly.

If by ponzi scheme you mean they have funded R&D and operational expenses with pre-order money, I do not think there can be any doubt of that.   But why do you think they are going to tell you that?  Why would they, as it is not to their advantage and it would hurt their image.  I do not understand what leverage you think you are going to have over someone that regularly belittles anyone who criticizes him and has made it obvious that he does not even have the technical knowledge to understand that some of the criticism could have saved his company money and time as it was pointing out major FLAWS in BFL's claims.

People have been warned and have bought with knowledge of the risk, let them lose their money assuming they will get out before it becomes unprofitable.  

[charleshoskinson]

If by ponzi scheme you mean they have funded R&D and operational expenses with pre-order money, I do not think there can be any doubt of that.   But why do you think they are going to tell you that?  Why would they, as it is not to their advantage and it would hurt their image.  I do not understand what leverage you think you are going to have over someone that regularly belittles anyone who criticizes him and has made it obvious that he does not even have the technical knowledge to understand that some of the criticism could have saved his company money and time as it was pointing out major FLAWS in BFL's claims.

People have been warned and have bought with knowledge of the risk, let them lose their money assuming they will get out before it becomes unprofitable. 

I am beginning to doubt that actually ever built a functional product. The questions I have asked will determine if this is true and also explain the persistent delays. As for leverage, an open letter is the first step in a legal process for a class action lawsuit and I will also use some of my friends in the government to pursue a consumer fraud investigation. The more public the open letter gets and the more questions that get broadcast to the open domain, the more cancellations will occur. Also if they refuse to answer basic questions regarding their operations, then it is my hope this forum will pull their ads of BFL.

I am completely serious about this pursuit. We cannot allow fraud to exist in this form in our community. It would be one thing for a failed kickstarter or if a company was transparent with their failures, but it is entirely different to make bold market claims and then consistently not deliver without any explanation while continuing to take orders.

[Minor Miner]

I wish you luck, sincerely.  I think the damage they have done is real and will last, hopefully raising the bar on future businesses.  On the bright side, for people mining, they have removed a lot of competition for a long time from the market. 
 I think you can trust Greenberg up in winnipeg and he has dismantled the 4GH/s thing that they sent him.  He is easy to PM and quite responsive I am sure.   He has one, they are 'real'.   Not what was sold nor what was hyped, but real.

[bitcoinminer]

I'm taking preorders for my Lunar Lander home assembly kits... ;-)

[bassclef]

Good luck with this. As a newcomer to the community, I am pretty unimpressed by BFL's practices, mainly their lack of truthful communication with the community and inability to deliver on promises and timelines made. There are indeed questions to be answered, and the threat of a class-action lawsuit would surely motivate them to be more forthcoming.

[bitcoinminer]

Look at it this way though, if they ARE truly going to put these products out, it's essentially going to be the end of mining for most of us.

[jml]

After much discussion on this forum regarding the business practices of Butterfly labs [BFL], it has become clear to me that there are several unanswered questions. Should BFL not commit to a ship date for their ASICs by the end of April and independent members of this community verify that they have received the product they ordered, I will draft an open letter to BFL. Its purpose is to determine the following:

• When did BFL have a working prototype of at least one of the ASIC products and how did they infer their engineering claims for both performance and power consumption?
• Will BFL consent to an independent audit of their corporation accounts?
• Did BFL finance (in part or fully) the development of their product line from preorders?
• Who is currently fabricating the chips within their products and can BFL produce on demand the contract signed with said fabricator?
• What is BFL's estimated shipping volume for ordered units per month
• How was BFL able to sustain itself during the delays?
• Has BFL engaged in mining and if so for how long and to what extent?

This list is a starting point. I'd like the engineers, accountants and legal professionals in this community to chime in to contribute their concerns. We have a duty to self-regulate and root out fraud where it occurs. Many people here have invested in BFL products and this forum runs ads.

Suppose you draft and send off the letter and BFL PR never answers back? What would be next? Sue them?

Now my question:
Since they have also outsourced the procurement of ASIC chips, did they also outsource firmware development of the mining devices? This would also add delays if problems are spotted on the way.

[hammz]

Not sure why anyone would hand over cash to a company that doesn't have any product to deliver, especially if they are a new company, unless you have money to burn that is.

Maybe ask someone that you just met to hold some gold for you for a few months, then demand they give you a nice crisp paper receipt in return so you can sleep at night?

Can't see any business being in business for long operating on this model moving forward.

Best of luck to all that ordered.

[glitch003]

After much discussion on this forum regarding the business practices of Butterfly labs [BFL], it has become clear to me that there are several unanswered questions. Should BFL not commit to a ship date for their ASICs by the end of April and independent members of this community verify that they have received the product they ordered, I will draft an open letter to BFL. Its purpose is to determine the following:

• When did BFL have a working prototype of at least one of the ASIC products and how did they infer their engineering claims for both performance and power consumption?
• Will BFL consent to an independent audit of their corporation accounts?
• Did BFL finance (in part or fully) the development of their product line from preorders?
• Who is currently fabricating the chips within their products and can BFL produce on demand the contract signed with said fabricator?
• What is BFL's estimated shipping volume for ordered units per month
• How was BFL able to sustain itself during the delays?
• Has BFL engaged in mining and if so for how long and to what extent?

This list is a starting point. I'd like the engineers, accountants and legal professionals in this community to chime in to contribute their concerns. We have a duty to self-regulate and root out fraud where it occurs. Many people here have invested in BFL products and this forum runs ads.

BFL has responded to nothing so far.  But I'm sure an angry letter will change that! They'll read it and panic and reply immediately, I'm sure!  

Or they'll ignore it and laugh while sitting on their pile of money.  Stop wasting your time.

[charleshoskinson]

Suppose you draft and send off the letter and BFL PR never answers back? What would be next? Sue them?

Now my question:
Since they have also outsourced the procurement of ASIC chips, did they also outsource firmware development of the mining devices? This would also add delays if problems are spotted on the way.

They claim to be developing the firmware in house https://forums.butterflylabs.com/announcements/692-bfl-asic-status-2.html.

BFL has responded to nothing so far.  But I'm sure an angry letter will change that! They'll read it and panic and reply immediately, I'm sure!  

Or they'll ignore it and laugh while sitting on their pile of money.  Stop wasting your time.

The first step in initiating a class action lawsuit is usually an open letter alongside a search for victims of a company's actions. This letter will be part of the open domain and it is their choice to respond. I feel the questions are legitimate to ask and absolutely deserve to be answered. Should they ignore them, then the next step is to retain a law firm to commit to a class action suit. They will draft another query and start a victim search. From there a lawsuit will be filed concurrently with a criminal fraud complaint.

This will take a great deal of my time and thus I will commit to it only if my two criteria are met:

• BFL does not start shiping its production units to its queue within the next 30 days
• Independent sources verify an actual ASIC exists developed by BFL (I have not seen a single review unit opened)

I understand delays can occur within any venture; however, the nature of the delays and the way they have handled the delays has lead me to believe BFL financed the production of their ASICs using preorder money. Therefore, they may not have enough cash on hand to actually manufacture and deliver the units they are legally committed to deliver. In Ponzi schemes this is generally handled by a long queue with prior orders financed by future orders. As long as the queue is sufficiently filled, they can continue to deliver some product. Any disruption in order flow would result in a collapse of the company, which is why I am asking if they will commit to outside audit to verify this has not occurred.

It is important to note that I do not have evidence of these claims. This is merely speculation from my experience in the business world and watching the BFL story unfold. I have no desire to rock the boat. But the alternative is accepting that hundreds of people on bitcointalk could have been defrauded and the media runs another hit story on how terrible bitcoins are.

(If anyone in this community has received a product from BFL, then could you please verify that it is indeed to the specifications they have claimed after their most recent delay? I will drop this matter if someone can verify that the unit exists from BFL and a large volume of units are being shipped)

[Minor Miner]

user grnbrg has opened and dismantled his.   I think his name is bryan greenberg in winnipeg canada.   He has posted pics on butterfly labs site.  

https://forums.butterflylabs.com/hardware-discussion/1983-grnbrgs-unboxing-teardown-new-bitforce-5-gh-s-sc-miner.html

[charleshoskinson]

user grnbrg has opened and dismantled his.   I think his name is bryan greenberg in winnipeg canada.   He has posted pics on butterfly labs site.

Can he then post something in this thread? And also this does not impact the ponzi potential. Only the shipping volume will determine if BFL is legitimate. Again, they can finance the manufacturing and shipping of previous units with new orders. As long as the queue is filled, they can continue to ship. If BFL can exhaust a large chunk of their queue while staying solvent, then they are not running a ponzi scheme. 

I will back off if units start shipping and simply wait and see.

[mccoyspace]

Here is an unboxing video of a unit that shipped earlier this week:
http://codinginmysleep.com/bfl-jalapeno-unboxing-and-demo/

[charleshoskinson]

I have seen and actually posted this video in a prior thread. Again, the unit was never opened. Also this does not mean BFL is financially capable of shipping every unit in the queue. If I sell you something, then I have an obligation to deliver it within the conditions of our agreement. BFL did not put a disclaimer: "Only if enough other people buy too!". The ponzi question will be answered naturally by shipping volume. Unless the queue is emptied within a few months, BFL is most likely running a ponzi scheme.

[Logik]

Dude, inform yourself some more on the latest updates and use the right forum.

BFL News (Twitter)
BFL Haters Forum

I don't think BFL cares about internet police at this point. Real police, if you tried to get them involved, will hear the word 'Bitcoin' and think 'imaginary internet problems'. The only thing that can, and possibly did, make them take any notice was complaints to PayPal (several pre-order customers have stated that PayPal compliance dept. called them on the phone and asked if they had received their products yet).

They are trickling out prototype Jalapeños and might have the prototype of the Single SC completed in a few weeks.

[charleshoskinson]

Well, then let's just wait and see. If I am wrong, then no one has anything to worry about. Let's see if units actually ship to customers who have waited very patiently for many months.