Area bitcoin operator allowed to resume some business

A federal judge on Thursday allowed area bitcoin company Butterfly Labs Inc. to resume some of its business.

The Overland Park-based company, which has been under the temporary control of a federally appointed receiver since Sept. 18, has been allowed to reopen for limited operations, according to a 34-page order issued by U.S. District Judge Brian C. Wimes.

The Federal Trade Commission had charged the company with defrauding more than 20,000 customers of $20 million to $50 million. Federal attorneys and Butterfly representatives began negotiating earlier this week to resolve some of the issues that led the judge to issue a temporary restraining order and freeze the company’s assets.

Butterfly said in a statement that while Thursday’s court action “does not allow (it) to fully serve our customers as desired, it is a step in the right direction and will allow for limited order fulfillment.”

The company said it will “continue to cooperate closely” with the court-appointed receiver.

Butterfly, according to the FTC, took money from customers for computers that would allow them to earn bitcoins. Instead of delivering the machines to customers, the company used them to earn bitcoins for itself or delivered machines that were worthless, the FTC alleged.

Bitcoin is a virtual currency that lacks government backing but is accepted by its followers in place of dollars or other government-backed currencies. A bitcoin trades for about $430.

Butterfly said although the court action is a “promising sign,” the charges it is facing have “severely damaged our reputation and it is up to Butterfly Labs to attempt to repair that damage.”

The company also said it intended to “address all inaccuracies in due course.”

This story was originally published October 2, 2014 at 5:17 PM with the headline "Area bitcoin operator allowed to resume some business."