Feds, Kansas bitcoin company negotiating

LEAWOOD, Kan. (AP) — A Kansas-based bitcoin company that has been sued by federal authorities is negotiating to determine if it can resume some operations.

The Federal Trade Commission’s recently filed complaint in U.S. District Court in Kansas City alleges Butterfly Labs defrauded more than 20,000 customers out of between $20 million to $50 million.

Butterfly Labs, based in Leawood, was placed under temporary control of a federally appointed receiver and had its assets frozen last week. A hearing Monday to determine whether the order should become permanent was recessed after a judge extended the temporary order to Friday so attorneys could begin negotiations, The Kansas City Star reported.

Butterfly Labs officials have denied the allegations in court documents and previous statements and called the FTC action unnecessary and heavy-handed.

“I’m unable to comment on ongoing negotiations, but the parties continue to work together,” said Jim Humphrey, an attorney representing Butterfly Labs. “We remain optimistic that we will be able to serve our customers again soon.”

An attorney for the FTC declined to comment.

U.S. District Judge Brian C. Wimes encouraged the two sides Monday to begin negotiations and asked about a plan the receiver had proposed to allow Butterfly Labs to operate again. Attorneys for both sides praised the plan but did not discuss details during the hearing.

Butterfly Labs said in court documents that it has been working with the Johnson County district attorney’s office since last fall to resolve customer complaints. District Attorney Stephen Howe confirmed he’s investigating the complaints.

“They have cooperated with our investigation,” Howe said. “Our hope is ultimately that the consumers get taken care of.”



Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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