You may have missed this one:
http://www.bizjournals.com/kansascity/news/2014/01/15/leawood-bitcoin-company-faces-lawsuit.html?page=all?betterTitle"A local company considered to be one of the top producers of Bitcoin mining equipment is headed to court.
Leawood-based BF Labs Inc., better known as Butterfly Labs, has spent the past year defending itself to angry customers who preordered equipment that took months longer to ship than the company promised.
One customer, a man who lives in China and is working with local attorney Robert Flynn of The Flynn Law Firm PC, is alleging that the delay cost him millions in lost revenue and constitutes fraud.
BF Labs produces equipment that allows individuals to harvest Bitcoins.
Bitcoin is a form of digital currency created in 2009 by an anonymous Internet user who goes by the name Satoshi Nakamoto. Instead of a physical coin, each Bitcoin is a long digital string of numbers that makes it identifiable.
Nakamoto "buried" 21 million Bitcoins in a complex mathematical puzzle. They're "mined," or extracted, by solving a block of that mathematical riddle. Each time a new block is unlocked, the miner receives 25 Bitcoins for his work — currently trading for about $25,000.
The riddles were easy to solve at first and could be done using standard computer processing power. But as each new block of Bitcoins is unlocked, the riddle becomes more difficult.
Today, it takes special equipment specifically designed to do nothing but run through possible solutions to unlock Bitcoins. The faster and more advanced the equipment, the more Bitcoins each user can mine.
In March 2013, Martin Meissner preordered equipment worth more than $60,000 with the expectation that it would ship by June or July at the latest. He never received the equipment and eventually asked for a refund — which he says he also never received.
The equipment that Meissner bought initially would allow him to mine 150 Bitcoins every day, netting him roughly $150,000 a day. But as it becomes harder to unlock the Bitcoin blocks, it takes longer for the equipment to find the answer, thereby unlocking fewer Bitcoins.
That same equipment today would net Meissner only about one Bitcoin a day, the lawsuit alleges.
It's a massively diminished return on his investment, Flynn said. It also means that Meissner has missed out on months' worth of mining. Flynn calculates the loss to be closer to $5 million.
The suit, which was filed in U.S. District Court in Kansas, alleges fraud, violations of the Kansas Consumer Protection Act, negligent misrepresentation and breach of contract.
But perhaps the most serious allegation made in the case is that not only did BF Labs fail to meet the terms of its contracts, but company executives potentially used clients' money to manufacture equipment that they kept for themselves instead of shipping to customers.
"Mr. Meissner anticipates that discovery may bear out that the reason behind BF Labs' commercially unreasonable shipping practices is that BF Labs utilized the earliest Bitcoin Miners off the manufacturing line for its own Bitcoin mining endeavors, to its clients' detriment, which would be unreasonable, wanton and reckless," the petition said.
Flynn said that even if BF Labs kept each piece of equipment for one day longer, plugged it in and mined Bitcoins before shipping it out, it could net, in today's trade value, between $80,000 and $100,000 worth of Bitcoins.
"There are more than enough rumblings," Flynn said. "It's naïve to believe everything you read, not to mention everything you read on the Internet, but there are enough rumblings out there that I truly believe where there's smoke there's fire. ... Right now, we have no hard evidence, but I have every faith in the federal court system that we're going to get to the bottom of it, and I really suspect that our greatest fears — and the fears of these thousands of other miners out there — will be confirmed."
The company said those claims in particular were "irresponsible and false."
A judge in the case initially issued an entry of default, which BF Labs now seeks to have vacated.
"The focus is on customer satisfaction with BF Labs and our products," the company said in a statement through its attorney, Jim Humphrey of Polsinelli PC. "And we are disappointed in the filing of the lawsuit. We are taking this issue very seriously, and once we were notified of the lawsuit, we took steps to defend our interests, and we will continue to do so vigorously as we dispute the claims"
