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Author Topic: Butterfly Labs is a Ponzi Scheme  (Read 4604 times)
Nightowlace
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May 26, 2013, 05:47:57 PM
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Lets take a look at Butterfly Labs and the break down of a Ponzi Scheme. Now a Ponzi Scheme is typically an investment having to do with returns/gains. However in this case it has to do with the promise of mining equipment and the "return/gains" you will receive from it.

The Ponzi scheme usually entices new investors by offering higher returns than other investments, Butterfly Labs Asics will be faster and more energy efficient producing greater revenue in the form of short-term returns that are either abnormally high Has stated several times that they will "blow Avalon asics away" or unusually consistent. Perpetuation of the high returns requires an ever-increasing flow of money from new investors to keep the scheme going They're coming we swear, buy more, keep buying, we are just a few weeks from shipping.

Typically extraordinary returns are promised on the investment, and vague verbal constructions We are experiencing a problem with the power, just a few more tweaks of the boards, new chips will be arriving for testing shortly might be used. The promoter sells shares to investors by taking advantage of a lack of investor knowledge or competence Or in this case banks on the previous models reputation to convince even knowledgeable miners that hey we gave you this before you're going to want this new one. Also by mass marketing, mass selling to all of the noobs.

Ponzi schemes sometimes commence operations as legitimate investment vehicles, such as hedge funds. For example, a hedge fund can degenerate into a Ponzi scheme if it unexpectedly loses money (or simply fails to legitimately earn the returns promised and/or thought to be expected) and the promoters, instead of admitting their failure to meet expectations, fabricate false returns and, if necessary, produce fraudulent audit reports. This to me best describes Butterfly Labs in a nut shell. They fully believed that they would be capable of delivering the product they set out to deliver, however have since realized that they are in way over there head and instead of admitting fault and admitting that they lost your money in the process of trying to develop and produce this machine they have taken the route of deflect, deny, continue selling and hope that we will be able to finally produce this product before major legal action comes crashing down on us and we have to admit we fucked up royally

Initially the promoter will pay out high returns to attract more investors, and to lure current investors into putting in additional money. In the case of Butterfly Labs lets start releasing the smallest unit we were able to get to finally produce the GH we promised. This should start to quiet down the people speaking out against us while getting the believers to start pumping more money in because "we are now shipping" Other investors begin to participate Noobs "Oh shit they are finally shipping lets buy, buy, buy, leading to a cascade effect. The "return" to the initial investors is paid out of the investments of new entrants People who still think Butterfly Labs are full of shit and call them out on it get their refunds and Butterfly Labs can say "Hey we will give you a refund if you don't believe us", and not out of profits.

Often the high returns (promised) encourage investors to leave their money in the scheme For fear of not missing the boat or getting left behind when they finally start to ship, with the result that the promoter does not have to pay out very much to investors; he simply has to send them statements showing how much they have earned. This maintains the deception that the scheme is a fund with high returns.

Promoters also try to minimize withdrawals by offering new plans to investors, often where money is frozen for a longer period of time, in exchange for higher returns. The promoter sees new cash flows as investors are told they cannot transfer money from the first plan to the second. If a few investors do wish to withdraw their money in accordance with the terms allowed, their requests are usually promptly processed, which gives the illusion to all other investors that the fund is solvent. ie Refunds processed immediately, jalapenos shipping, etc.

The promoter of the scheme becomes very defensive of the scheme often resulting to name calling, and taking great offense that you could even question the legitimacy of the scheme. Which I have seen employees of BFL do numerous times, and I am sure is what is going to happen to me as soon as this is posted

But hey, I would love to be proven wrong. I would actually pay BFL $5,000 right now today to prove me wrong and send me a BFL 50GHs Single to which I will gladly unveil on youtube, plug in and begin to operate. Then I will defend them on every single board, page, thread etc. But I know this will not happen because the units do not exist, and can not be shipped, nor operated.

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May 27, 2013, 08:53:22 AM
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Yup what makes them a ponzi is that they need new pre-order customer money to pay off existing pre-order customers.

Classic ponzi.

They promised SPECIFIC hash rates and power. Unrealistic specs. This is the same as promising high returns as a ponzi does.

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