Finally! After weeks and weeks turned into years of fraud and deceit, a fantastic piece of investigative journalism! Cyrus Farivar, you da man!
Digging for answers: The “strong smell” of fraud from one Bitcoin miner makerA Butterfly Labs exec loses a probation hearing, but details from the case are worse.
Vleisides’ probation officer, Courtney Pierce, filed a violation report with the Missouri federal judge handling his case (just over two months after Ars published our first articles about Butterfly Labs and its mining machines). In her memo to the judge, Pierce wrote that Vleisides was now an employee of and the dominant shareholder in BFL, a company which "advertises all of its technology for purchase through pre-order... Vleisides did not seek the express approval of the probation officer prior to engaging in a business that involves the solicitation of funds through pre-orders."
She continued:
The Probation Office has been notified by the US Postal Inspection Service that hundreds of complaints have been filed against BFL from individuals who have placed pre-orders for hardware from BFL.
The seriousness of Vleisides' instant offense [the lottery scam], coupled with his current involvement in a somewhat similar business enterprise are cause for concern.
...
Judge Kays expressed clear reservations about BFL's business and Vleisides' involvement in a company taking so much cash up front. He ordered two supplementary years of supervision for Vleisides, along with a new set of conditions that include regular government access to his "person, his property, house, residence, office, vehicle, papers, computer, other electronic communication or data, storage devices or media, and effects." He said Vleisides must work with Pierce "to communicate, create transparencies. Any loan, especially $64,000 or whatever it is, is something she needs to know about before it's made, no matter [what]."
The judge's most damning comments, however, centered on his overall BFL observations:
"Now, there is a stench coming from Butterfly Labs. It's a strong smell. It's not enough to send you to prison today, because, to be quite honest with you, if it was, we'd be talking about 24 months in prison. It's not—I think it's too close. I think [defense witness] Mr. Bourne did a very good job of testifying, and it assisted your defense greatly. But if I find out that there is this fraud word involved in this part, you know, Mr. Vleisides, as we say here at the courthouse, you need to get your toothbrush and get your things in order, because fraud will not be tolerated, you understand that? So I would work very hard to make these consumers happy consumers who you've dealt with."
More here:
http://arstechnica.com/tech-policy/2014/04/digging-for-answers-the-strong-smell-of-fraud-from-one-bitcoin-miner-maker/