Today the United States Federal Trade Commission announced it reached a settlement against Butterfly Labs and the firm's principals Sonny Vleisides and Jody/Darla Drake. Out of a 38,615,161 United States dollar judgment against the firm and Sonny Vleisides the firm is to pay 15,000 and Sonny Vleisides is to pay 4,000. A separate judgment against Jody/Darla Drake for 135,878 United States dollars will similarly be suspended in exchange for Jody/Darla surrendering all of the Bitcoin she mined on company machines thus giving her a choice in how to pay her penalty. These "partial" suspensions were agreed to based on the defendants' inability to pay and are offered in exchange for various promises to not engage in the criminal behavior they built their "business" on for some finite period of time. The orders pertaining to Sonny Vleisides and Butterfly Labs as well as the order for Jody/Darla Drake are reproduced in plaintext below:

First, Sonny and Butterfly Labs:

UNITED STATES DISTRICT COURT

WESTERN DISTRICI' OF MISSOURI

FEDERAL TRADE COMMISSION,

Plaintiff,

v.

BF LABS INC., et al.,

Defendants.

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Case No. 4:14-cv-00815-BCW

STIPULATED FINAL ORDER FOR PERMANENT lNJUNCTION

AND MONETARY JUDGMENT AS TO DEFENDANTS BF LABS INC. AND SONNY

YLEISIDES

Plaintiff, the Federal Trade Commission ("FTC"), fi led its Complaint for Permanent

Injunction and Other Equitable Relief, subsequently amended as First Amended Complaint for

Permanent Injunction and Other Equitable Relief ("Complaint"), pursuant to Section 13(b) of the

Federal Trade Commission Act ("FTC Act"), 15 U.S.C. § 53(b). The FTC and Defendants, by

and through undersigned counsel, have stipulated to the entry of this Stipulated Order for

Permanent Injunction and Monetary Judgment to resolve all matters in dispute in this action

between them.

THEREFORE, IT IS ORDERED as follows:

FINDINGS

1.

This Court has jurisdiction over this matter.

2.

The Complaint alleges that Defendants participated in deceptive and unfair acts or

practices in violation of Section 5 of the FTC Act, 15 U.S.C. § 45, in the sale and marketing of

Bitcoin mining products and services.

3.

Defendants neither admit nor deny the allegations in the Complaint, except as

specifically stated in this Order. Only for purposes of this action, Defendants admit tbe facts

necessary to establish jurisdiction.

4.

Defendants waive any claim that they may have under the Equal Access to Justice

Act, 28 U.S.C. § 241 2, concerning the prosecution of this action through the date of this Order,

and agree to bear their own costs and attorney fees.

5.

The FTC and Defendants agree that this Order resolves all matters in dispute in

this action between them, including any potential claims and counterclaims related to the

allegations that formed the basis of Defendants' counterclaims. Defendants and the FTC waive

all rights to appeal or otherwise challenge or contest the validity of this Order.

DEFINITIONS

For the purpose of this Order, the following defrnitions apply:

A.

"Bitcoin product or service" means any Bitcoin mining product or service, or

any product, service, plan or program designed or represented, expressly or by implication, to

store, secure, transact, transfer, or otherwise enable the use of Bitcoin or any other virtual

currency.

B.

"Bitcoin mining product or service" means any product, service, plan, or

program designed or represented, expressly or by implication, to generate Bitcoins or any other

virtual currency.

C.

"Clearly and conspicuously" means

1.

In textual communications, the disclosure must be in a noticeable type,

size, and location, using language and syntax comprehensible to an

ordinary consumer;

2.

In communications disseminated orally or through audible means, the

disclosure must be delivered in a volume, cadence, language, and syntax

sufficient for an ordinary consumer to hear and comprehend them;

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3.

In communications disseminated through video means: (I) written

disclosures must be in a form consistent with definition B. I and appear on

the screen for a duration sufficient for an ordinary consumer to read and

comprehend them, and be in the same language as the predominant

language that is used in the communication; and (2) audio disclosures

must be consistent with definition B.2; and

4.

The disclosure cannot be combined with other text or information that is

unrelated or immaterial to the subject matter of the disclosure. No other

representation(s) may be contrary to, inconsistent with, or in mitigation of,

the disclosure.

D.

"Defendants" means the Individual Defendant and the Corporate Defendant,

individually, collectively, or in any combination.

I.

"Corporate Defendant" means BF Labs Inc. and its successors and

assigns.

2.

E.

"Individual Defendant" means Sonny Vleisides.

"Prompt Refund" means a refund sent by any means at least as fast and reliable

as first class mail within seven (7) business days of the date on which the consumer requests a

refund or a refund is required as specified under Section ill and Section IV or cancels an order

under Section V of this order. Provided, however, that where the seller cannot provide a refund

by the same method payment was tendered, prompt refund shall mean a refund sent in the form

of cash, check, or money order, by any means at least as fast and reliable as first class mail,

within seven (7) business days of the date on which the seller discovers it cannot provide a

refund by the same method as payment was tendered.

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ORDER

I. PROIDBITION AGAINST DECEPTIVE CLAIMS RELATING TO

BITCOIN MINING PRODUCTS AND SERVICES

IT IS ORDERED that Defendants, Defendants' officers, agents, employees, and all other

persons in active concert or participation with any of them, who receive actual notice of this

Order, whether acting directly or indirectly, in connection with the advertising, marketing,

promotion, offering for sale or sale of any Bitcoin mining product or service, Defendants, are

permanently restrained and enjoined from:

A

misrepresenting, or assisting others in misrepresenting, expressly or by

implication:

1.

that consumers will be able to use such product or service to generate

Bitcoins or other virtual currency; or

2.

that consumers will be able use such product or service to generate a

profitable or substantial number of Bitcoins or other virtual currency; or

3.

that any such product or service wiU be delivered by or provided by a

certain date or tirneframe;

B.

making any representation, or assisting others in making any representation,

expressly or by implication, concerning the claims set forth in I.A. I through l.A.3, unless the

representation is non-misleading and, at the time such representation is made, Defendants

possess and rely upon competent and reliable evidence tbat is sufficient to substantiate that the

representation is true; or

C.

representing, expressly or by implication, that Defendants market and sell such

product or service for consumers to use, without disclosing clearly and conspicuously, before

consumers pay for such product or service, any policy or practice Defendants have of using the

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product or service to mine for Bitcoins or other virtual currencies for themselves, prior to

delivering them to consumers.

IL PROHWITION AGAINST MISREPRESENTATIONS

RELATING TO ALL PRODUCTS AND SERVICES

IT IS FURTHER ORDERED that Defendants, Defendants' officers, agents, employees,

and all other persons in active concert or participation with any of them, who receive actual

notice of this Order, whether acting directly or indirectly, in connection with the advertising,

marketing, promotion, offering for sale or sale of any product or service, are permanently

restrained and enjoined from misrepresenting or assisting others in misrepresenting, expressly or

by implication:

A.

the terms of any refund, cancellation, exchange, or repurchase policy, or the

circumstances under which a full or partial refund will be granted or denied; or

B.

any other fact material to consumers concerning the product or service, including

but not limited to: any material aspects of the speed, efficiency, operational cost, performance, or

efficacy of such product or service.

JJI. PROHIBITION AGAINST PRE-PAYMENTS

IT IS FURTHER ORDERED that Defendants are permanently restrained and enjoined

fTom collecting an upfront payment from a consumer for the purchase of a Bitcoin product or

service unJess the Bitcoin product or service is available and the product will sbip within 30 days

of any payment or the service will be started within 30 days of payment. If Defendants are

unable to ship the product or start the service within 30 days, Defendants must provide the

consumer with a prompt refund within 7 working days of Defendants first becoming aware of

their inability to ship the product or start the service within the 30 day period.

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N. PROHIBffiON AGAINST MAINTAINING CONSUMERS' PAYMENTS

FOR DAMAGED OR INCORRECT PRODUCTS OR SERVICES

IT IS FURTHER ORDERED that Defendants, Defendants' officers, agents, employees,

and all other persons in active concert or participation with any of them, who receive actual

notice of this Order, whether acting directly or indirectly, in connection with the advertising,

marketing, promotion, offeri ng for sale or sale of any product or service for which Defendants

collect an upfront payment, are permanently restrained and enjoined from failing, upon a

consumer's request within 30 days of receipt of the product or service, to provide a prompt

refund of a consumer's payments for such product or service when Defendants delivered a

product that is damaged, or provided a product or service that did not meet promised

specifications.

V. OBTAINING CONSENT TO LATE DELIVERY

AND PROVIDING PROMPT REFUNDS

IT IS FURTHER ORDERED that Defendants, Defendants' officers, agents, employees,

and all other persons in active concert or participation with any of them, who receive actual

notice of this Order, whether acting directly or indirectly, in connection with the advertising,

marketing, promotion, offering for sale or sale of any product or service for which Defendants

collect an upfront payment and specify a delivery date, are permanently restrained and enjoined

from, when Defendants do not deliver such product or service within the time so represented,

failing to offer to consumers, clearly and conspicuously, and without prior demand, an option

either to consent to a delay in delivery or to cancel the order and receive a prompt refund

provided that: (1) such offer is made within a reasonable time after Defendants first become

aware of their inability to deliver within the time frame so represented; and (2) any offer to

consumers of such an option fully informs consumers regarding their right to cancel the order

and to obtain a prompt refund and provides a revised delivery date, except where Defendants

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lack a reasonable basis for providing a definite revised delivery date the notice informs

consumers that Defendants are unable to make any representation regarding the length of the

delay.

VI. MONETARY JUDGMENT AND PARTIAL SUSPENSION

IT IS FURTHER ORDERED that:

A.

Judgment in the amount of $38,615,161 is entered in favor of the FTC against

Defendants, jointly and severally, as equitable monetary relief.

B.

Corporate Defendant is ordered to pay to the FTC fifteen thousand dollars

($15,000). Such payment must be made on or before April 15, 2016, by electronic fund transfer

in accordance with instructions previously provided by a representative of the FTC.

C.

Individual Defendant is order to pay the FTC four thousand dollars ($4,000).

Such payment must be made on or before April 15, 2016, by electronic fund transfer in

accordance with instructions previously provided by a representative of the FTC.

D.

Upon the payment identified in Sections VI.B and Vl.C, the remainder of the

judgment as to the Defendants

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suspended. The FTC's agreement to the suspension of part of

the judgment is expressly premised upon the truthfulness, accuracy, and completeness of

Defendants' sworn financial statements and related documents (collectively, " financial

representations") submitted to the FTC, namely, the Financial Statement of Corporate Defendant

BF Labs Inc. signed by Sonny Vleisides on September 11, 2015, including its attachments and

the updated balance sheet as of September 30, 2015; and the Financial Statement of Individual

Defendant Sonny Vleisides signed on Sonny Vleisides on September 10, 2015, including the

attachments;

E.

The suspension of the judgment set forth in Section Vl.D will be lifted as to

Defendants if, upon motion by the FTC, the Court finds that Defendants failed to disclose any

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material asset, materially understated the value of any tangible or monetary asset, or made any

other material misstatement or omission in the financial representations identified above;

F.

If the suspension of the judgment is lifted for a reason set forth in Section VI.E,

then the full judgment becomes immediately due as to Defendants in the amount specified in

Subsection A above (whkh the parties stipulate only for purposes of this Section represents the

consumer injury alleged in the Complaint), less any payment previous ly made pursuant to this

Section, plus interest computed from the date of entry of this Order.

VII. ADDITIONAL MONETARY PROVISIONS

IT IS FURTHER ORDERED that:

A.

Defendants shall relinquish dominion and all legal and equitable right, title, and

interest in all assets transferred pursuant to this Order and may not seek the return of any assets.

B.

The facts alleged in the Complaint will be taken as true, without further proof, in

any subsequent civil litigation by or on behalf of the FTC, including in a proceeding to enforce

its rights to any payment or monetary judgment pursuant to this Order, such as a

nondiscbargeability complaint in any bankruptcy case.

C.

The facts alleged in the Complaint establish all elements necessary to sustain an

action by the FTC pursuant to Section 523(a)(2)(A) of the Bankruptcy Code, 11 U.S.C.

§ 523(a)(2)(A), and this Order will have collateral estoppel effect for such purposes.

D.

Defendants acknowledge that their Taxpayer Identification Numbers, which were

previously submitted to the FTC, may be used for collecting and reporting on any delinquent

amount arising out of this Order, in accordance with 3 l U.S.C. § 7701.

E.

All money paid to the FTC pursuant to this Order may be deposited into a fund

administered by the FTC or its designee to be used for equitable relief, including consumer

redress and any attendant expenses for the administration of any redress fund. If a representative

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ofthe FTC decides that direct redress to consumers is wholly or partially impracticable or money

remains after redress is completed, the FTC may apply any remaining money for such other

equitable relief (including consumer information remedies) as it determines to be reasonably

related to Defendants' practices alleged in the Complaint. Any money not used for such

equitable relief is to be deposited to the U.S . Treasury as disgorgement. Defendants have no right

to challenge any actions the FTC or its representatives may take pursuant to this Subsection.

VID. CUSTOMER INFORMATION

IT IS FURTHER ORDERED that Defendants, Defendants' officers, agents, employees,

and those persons or entities in active concert or participation with any of them who receive

actual notice of this Order, whether acting directly or indirectly, are permanently restrained and

enjoined from directly or indirectly:

A.

Failing to provide sufficient customer information that is in Defendants'

possession, custody, or control, to enable the FTC to administer efficiently consumer redress. If a

representative of the FTC requests in writing any information related to redress that is in

Defendants' possession, custody, or control, Defendants must provide it, in a mutually agreeable

form, within 14 days;

B.

Disclosing, using, or benefitting from consumer information, without the express

written consent of the consumer that enables a charge to or withdrawal from a customer's

account (including a credit card, bank account, or other fmancial account) that any Defendant

obtained prior to entry of this Order in connection with the marketing and sale of Bitcoin mining

products and services; and

C.

Failing to destroy such customer information in all forms in their possession,

custody, or control within thirty (30) days after receipt of written direction to do so from a

representative of the FTC. Provided, however, that customer information need not be disposed

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of, and may be disclosed, to the extent requested by a government agency or required by law,

regulation, or court order.

IX. ORDER ACKNOWLEDGEMENTS

IT IS FURTHER ORDERED that Defendants obtain acknowledgments of receipt of this

Order:

A.

Defendants, within seven (7) days of entry of this Order, must submit to the FTC

acknowledgments of rece ipt of this Order sworn under penalty of perj ury.

B.

For ten ( 10) years after entry of this Order, Individual Defendant for any business

that such Defendant, individually or collectively with any other Defendants, is the majority

owner or controls directly or indirectly, and the Corporate Defendant, must deliver a copy of this

Order to: (1) all principals, officers, directors, and LLC managers and members; (2) all

employees, agents, and representatives who participate in conduct related to the subject matter of

the Order; and (3) any business entity resulting from any change in structure as set forth in the

Section titled Compliance Reporting. In any other business, such as one in which the Individual

Defendant is an employee without any ownership or control, that Individual Defendant must

deliver a copy of this Order to all principals and managers of the business before participating in

conduct related to the subject matter of this Order. Delivery must occur within seven (7) days of

entry of this Order for current personnel. For all others, delivery must occur before they assume

the ir responsibilities.

C.

From each individual or entity to which Defendant delivered a copy of this Order,

Defendant must obtain, within thirty (30) days, a signed and dated acknowledgment of receipt of

this Order or certify in writing tbat it has been unable to do so.

X. COMPLIANCE REPORTING

IT IS FURTHER ORDERED that Defendants make timely submissions to the FTC:

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A.

One (1) year after entry of this Order, Defendants must submit a compliance

report, sworn under penalty of perjury:

l.

Each Defendant must: (a) identify the primary physical, postal, and email

address and telephone number, as designated points of contact, which

representatives of the FTC may use to communicate with Defendant; (b)

identify all ofthatDefendant's businesses by all oftheir names, telephone

numbers, and physical, postal, email, and Internet addresses; (c) describe

the activities of each business, including the products and services offered,

the means of advertising, marketing, and sales, and the involvement of any

other Defendant (which Individual Defendants must describe if they know

or should know due to their own involvement); (d) describe in detail

whether and how that Defendant is in compliance with each Section of this

Order; and (e) provide a copy of each Order Acknowledgment obtained

pursuant to tllis Order, unless previously submitted to the FTC;

2.

Add itionally, Individual Defendant must: (a) identify all telephone

numbers and all physical, postal, email and Internet addresses, including

all residences; (b) identify all business activities, including any business

for which such Defendant perfonns services whether as an employee or

otherwise and any entity in which such Defendant has any ownership

interest; and (c) describe in detail such Defendant's involvement in each

such business, including title, role, responsibil ities, participation,

authority, control, and any ownership.

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B.

For ten ( 10) years after entry of this Order, each Defendant must submit a

compliance notice, sworn under penalty of perjury, within fourteen (14) days of any change in

the following:

1.

Each Defendant must report any change in: (a) any designated point of

contact; or (b) the structure of Corporate Defendant, including: creation,

merger, sale, or dissolution of the entity or any subsidiary, parent, or

affiliate that engages in any acts or practices subject to this Order;

2.

Additionally, Individual Defendant must report any change in: (a) name,

including aliases or fictitious name, or residence address; or (b) title or

role in any business activity, including any business for which such

Defendant performs services whether as an employee or otherwise and any

entity in which such Defendant has any ownership interest, and identify

the name, physical address, and any Internet address of the business or

entity.

C.

Each Defendant must submit to the FTC notice of the filing of any bankruptcy

petition or insolvency proceeding by or similar proceeding by or against such Defendant within

fourteen (14) days of its filing.

D.

Any submission to the FTC required by this Order to be sworn under penalty of

perjury must be true and accurate and comply with 28 U.S.C. § 1746, such as by concluding: "I

declare under penalty of perjury under the laws of the United States of America that the

foregoing is true and correct. Executed on: _ __ _ _ __ ____" and supplying the

date, signatory's full name, title (if applicable), and signature.

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E.

Unless otherwise directed by a FTC representative in writing, all submissions to

the FTC pursuant to this Order must be emailed to DEbdef@ftc.gov or sent by o vernight courier

(not the U.S. Postal Service) to: Associate Director for Enforcement, Bureau of Consumer

Protection, Federal Trade Commission, 600 Pennsylvania Avenue NW, Washington, DC, 20580.

The subject Line must begin: FTC v. BF Labs Jnc.

XI. RECORDKEEPING

IT lS FURTHER ORDERED that Defendants must create certain records for ten (10)

years after entry of the Order, and retain each such record for five (5) years. Specifica lly,

Corporate Defendant and Individual Defendant for any business that such Defendant,

individually or collectively with any other Defendants, is a majority owner or controls directly or

indirectly, must create and retain the following records:

A.

Accounting records showing the revenues from all goods or services sold;

B.

Personnel records showing, for each person providing services, whether as an

employee or otherwise, that person' s: name; addresses; telephone numbers; job title or position;

and dates of service;

C.

Records of all consumer complaints and refund requests, whether received

directly or indirectly, such as through a third party, and any response;

D.

All records necessary to demonstrate fulJ compliance with each provision of this

Order, including aJI submissions to the FTC; and

E.

A copy of each unique advertisement or other marketing material.

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Xll. COMPLIANCE MONITORING

IT IS FURTHER ORDERED that, for the purpose of monitoring Defendants ' compliance

with this Order, including the fmancial representations upon which part of the judgment was

suspended and any failure to transfer any assets as required by this Order:

A.

Within fourteen (14) days of receipt of a written request from a representative of

the FTC, Defendants must: submit additional compliance reports or other requested information,

which must be sworn under penalty of perjury; appear for depositions; and produce documents

for inspection and copying. The FTC is also authorized to obtain discovery, without further leave

of court, using any of the procedures prescribed by Federal Rules of Civil Procedure 29, 30

(including telephonic depositions), 31, 33, 34, 36, 45 , and 69.

B.

For matters concerning this Order, the FTC is authorized to communicate directly

with each Defendant. Defendants must permit representatives of the FTC to interview any

employee or other person affiliated with any Defendant who has agreed to such an interview.

The person interviewed may have counsel present.

C.

The FTC may use all other lawful means, including posing, through its

representatives as consumers, suppliers, or other individuals or entities, to Defendants or any

individual or entity affiliated with Defendants, without the necessity of identification or prior

notice. Nothing in this Order limits the FTC's lawful use of compulsory process, pursuant to

Sections 9 and 20 ofthe FTC Act, 15 U.S.C. §§ 49, 57b-1.

D.

Upon written request from a representative of the FTC, any consumer reporting

agency must furnish consumer reports concerning Individual Defendants, pursuant to

Section 604(a)(l) of the Fair Credit Reporting Act, 15 U.S.C. § 168lb(a)(l).

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XIII. COOPERATION

IT IS FURTHER ORDERED that Defendants must fully cooperate with representatives

of the FrC in this case and in any investigation related to or associated with the transactions or

the occurrences that are the subject of the Complaint. Defendants must provide truthful and

complete information, evidence, and testimony. Defendants must appear for interviews,

discovery, hearings, trials, and any other proceedings that a FTC representative may reasonably

request upon 5 days written notice, or other reasonable notice, at such places and times as a FrC

representative may designate, w ithout the service of a subpoena.

XIV. RETENTION OF JURISDICTION

IT IS FURTHER ORDERED that this Court retains jurisdiction of this matter for

purposes of construction, modification, and enforcement of this Order.

SO ORDERED this _

_ day of _ _ _ _ _ _ _ _ _, 2015.

UNITED STATES DISTRICT JUDGE

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SO STIPULATED AND AGREED:

Defendant

Approved as to Form:

MA.R.K A. OLTHOFF (MO #38572)

MICHAEL S. FOSTER (MO #61205)

Polsinelli PC

900 W 48th Place

Suite 900

Kansas City, Missouri 64112-1895

Telephone: (816) 753-1000

Facsimile: (816) 753-1536

CHARLES M. THOMAS (MO #28522)

Assistant United States Attorney

Charles Evans Whittaker Courthouse

400 E Ninth Street

Room 5510

Kansas City, Missouri 64106

Telephone: (816) 426-3130

Facsimile: (816) 426-3165

Attorneys for Defendants BF Labs inc. and

Sonny Vleisides

Attorneys for Plaintiff

Federal Trade Commission

BRADEN M. PERRY (MO #53865)

Kennyhertz Perry, LLC

420 Nichols Road

Suite 207

Kansas City, Missouri 64112

Telephone: (816) 527-9445

Facsimile: (816) 844-2914

LEAH FRAZIER (DC #492540)

GREGORY A.ASHE(VA#39131)

JASON M. ADLER (IL #6295738)

Federal Trade Commission

600 Pennsylvania A venue NW

Mail Stop CC-10232

Washington, DC 20580

Telephone: (202) 326-3779 (Wong)

Telephone: (202) 326-2187 (Frazier)

Telephone: (202) 326-3719 (Ashe)

Telephone: (202) 326-3231 (Adler)

Facsimile: (202) 326-3768

Attorney for Defendant BF Labs Inc.

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