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;

2

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

i~

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.

II

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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Now for Jody/Darla:

UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF MISSOURI
FEDERAL TRADE COMMISSION,

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)
)
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Plaintiff,

v.

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

)

BF LABS INC., et al.,

Defendants.

)

STIPULATED FINAL ORDER FOR PERMANENT IN.nJNCTION
AND MONETARY JUDGMENT AS TO DEFENDANT DARLA DRAKE
Plaintiff, the Federal Trade Commission ("FTC"), ftled 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 Defendant Darla
Drake, by and through their undersigned counsel, have stipulated to the entry of this Final Order
for Permanent Injunction and Monetary Judgment to resolve all matters in djspute in this action
between them.
THEREFORE, IT IS ORDERED as follows:
FINDINGS
By stipulation of the parties, the Court finds as follows:
1. This Court has jurisdiction over this matter.
2. The Complaint alleges that Stipulating Defendant 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 ofBitcoin mining products and services.

3. The Stipulating Defendant neither admits nor denies the allegations in the Complaint,
except as specifically stated in this Order. Only for purposes of this action, the Defendant
admits the facts necessary to establish jurisdiction.
4. The Stipulating Defendant waives any claim that she may have under the Equal Access to
Justice Act, 28 U.S.C. § 2412, concerning the prosecution of this action through the date
of this Order, and agrees to bear her own costs and attorney fees.
5. The FTC and the Stipulating Defendant agree that this Order resolves all matters in
dispute in this action between them. The Stipulating Defendant 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 definitions apply:
A.

"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.
B.

"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
ord inary 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;

3.

In communications disseminated through video means: (1) written
disclosures must be in a form consistent with definition B. l and appear on
the screen for a duration sufficient for an ordinary consumer to read and
2

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.

T he disclosure cannot be combined with other text or information that is
unrelated or immaterial to the subject matter of the disclosure. No other
representatjon(s) may be contrary to, inconsistent with, or in mitigation of,
the disclosure.

C.

"Defendants" means the Corporate Defendant and the Ind ividual Defendants,

individually, collectively, or in any com bination. "Corporate Defendant" means BF Labs, Inc.
and its successors and assigns. "Individual Defendants" means Sonny Vleisides, Darla Drake,
and Nasser Ghoseiri.

D.

"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 as specified under Section ill or cancels an order under Section lV ofthis 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 re liable 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.

E.

"Stipulating Defend a of' means Dar la Drake and by whatever names she right

be known.

3

ORDER
I. PROHffiJTION AGAINST DECEPTIVE CLAIMS RELATING TO BITCOIN
MINING PRODUCTS AND SERVICES
IT TS ORDERED that the Stipulating Defendant, her officers, agents, employees, and aU
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, are permanently
restrained and enjoined from:
A.

misrepresenting, or assisting others m misrepresenting, expressly or by

implication:
I.

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 ofBitcoins or other virtual currency; or

3.

that any such product or service wiU be delivered by or provided by a
certain date or timeframe;

B.

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

expressly or by implication, concerning the claims set forth in l.A.l through l.A.3, unless the
representation is non-misleading and, at the time such representation is made, the Stipulating
Defendant possesses and relies upon competent and reliable evidence that is sufficient to
substantiate that the representation is true; or
C.

representing, expressly or by implication, that the Stipulating Defendant markets

and sells such product or service for consumers to use, without disclosing Clearly and
Conspicuously, before consumers pay for such product or service, that the Stipulating Defendant

4

may use such products or services in testing or otherwise, to mine for Bitcoins or other virtual
currencies for itself, prior to delivering them to consumers.

n.

PROBlBITION AGAINST MISREPRESENTATIONS RELATING TO ALL
PRODUCTS AND SERVICES

IT IS FURTHER ORDERED that the Stipulating Defendant, her 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, canceJlation, 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, such as any
material aspects of the speed, efficiency, operational cost, performance, or efficacy of such
product or service.

ill. PROHIBITION AGAJNST MAINTAINING CONSUMERS' PAYMENTS FOR
DAMAGED OR INCORRECT PRODUCTS OR SERVICES
IT IS FURTHER ORDERED that Stipulating Defendant, her 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 Stipulating
Defendant collects 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

5

a product that is damaged, or provided a product or service that did not meet promised
specifications.
IV. OBTAINING CONSENT TO LATE DELIVERY AND PROVIDING PROMPT
REFUNDS

IT IS FURTHER ORDERED that the Stipulating Defendant, her 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
the Stipulating Defendant collects an upfront payment and specify a delivery date, are
permanently restrained and enjoined from, when the Stipulating Defendant does 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 the Stipulating Defendant first become aware of her 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 the Stipulating Defendant lacks a reasonable basis
for providing a definite revised delivery date the notice informs consumers that the Stipulating
Defendant is unable to make any representation regarding the length of the delay.
V. MONETARY JUDGMENT AND PARTIAL SUSPENSION
IT IS FURTiffiR ORDERED that:
A. Judgment in the amount of ONE HUNDRED THIRTY FIVE THOUSAND EIGHT
HUNDRED AND SEVENTY EIGHT DOLLARS ($1 35,878) is entered in favor of the FTC
against the Stipulating Defendant, as equitable monetary relief.

6

B. The Stipulating Defendant shall, within ten ( 10) business days from the date of entry of
this Order, liquidate all Bitcoin in her possession, custody, or control and transfer to the FTC or
its designated agent all proceeds from such liquidation.
C. Upon the asset transfers identified in this Section, the remainder of the judgment as to the
Stipulating Defendant is suspended, subject to the Subsections below.
D. The FTC's agreement to the suspension of the judgment is expressly premised upon the
truthfulness, accuracy, and completeness of the Stipulating Defendant's sworn financial
statements and related documents (collectively, "financial representations") submitted to the
FTC, namely, the Financial Statement of Stipulated Defendant Darla Drake signed on September
23, 201 4 as supplemented by the Financial Statement of Stipulated Defendant Darla Drake
signed on August 3, 2015, including its attachments.

E. The suspension of the judgment will be lifted as to the Stipulating Defendant if, upon
motion by the FTC, the Court finds that the Stipulating Defendant failed to disclose any material
asset, materially misstated the value of any asset, or made any other material misstatement or
omission in the fmancial representations identified above.
F. If the suspension of the judgment is lifted, the judgment becomes immediately due as to

the Stipulating Defendant in the amount specified in Subsection A above (which the parties
stipulate only for purposes of this Section represents the consumer injury alleged in the
Complaint), less any payment previously made pursuant to this Section, plus interest computed
from the date of entry of this Order.

VI. ADDITIONAL MONETARY PROVISIONS
IT IS FURTHER ORDERED that:
A. Stipulating Defendant relinquishes 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.

7

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 j udgment pursuant to this Order, such as a
nondischargeabil ity 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. The Stipulating Defendant acknowledges that her Taxpayer Identification Number, which
was previously submitted to the FTC, may be used for collecting and reporting on any delinquent
amount arising out of this Order, in accordance w ith 31 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 . Jf a representative
of the 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 may 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.
F. Upon written request from a representative of the FTC, any consumer reporting agency
must furnish consumer reports concerning the Stipulating Defendant, pursuant to
Section 604(a)(l) of the Fair Credit Reporting Act, 15 U.S.C. § 1681 b(a)(l).

8

VII.

CUSTOMER INFORMATION

IT IS FURTHER ORDERED that the Stipulating Defendant, her 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
restrai ned and enjoined from directly or indirectly:
A. Failing to provide sufficient customer information that is in the Stipulating Defendant's
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 the
Stipulating Defendant's possession, custody, or control, the Stipulating Defendant must provide
it, in a mutually agreeable form, within 14 days;
B. Disclosing, using, or benefitting from customer infonnation, without the express written
consent of the consumer that enables a charge to or withdrawal from a customer's account
(includ ing a credit card, bank account, or other financial account) that any Defendant obtained
prior to entry of this Order in connection with the marketing and sale ofbitcoin mining products
and services; and
C. Failing to destroy such customer information in aJI fonns 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 of, and may be
disclosed, to the extent requested by a government agency or required by law, regulation, or
court order.

9

Vill. ORDER ACKNOWLEDGEMENTS
IT IS FURTHER ORDERED that the Stipulating Defendant obtain acknowledgments of
receipt of this Order:

A. The Stipulating Defendant, within seven (7) days of entry of this Order, must submit to
the FTC an acknowledgment o f receipt of this Order sworn under penalty of perjury.
B. For ten (10) years after entry of this Order, the Stipulating Defendant for any business
that she, individually or collectively with any other Defendant, is the majority owner or controls
directly or indirectly, 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 ofthe 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, s uch as one in which the Stipulating Defendant is an employee without any ownership
or control, the Stipulating 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 7 days of entry of this Order for current personnel. To all
others, delivery must occur before they assume their responsibilities.
C. From each individual or entity to which the Stipulating Defendant delivered a copy of
this Order, the Stipulating Defendant must obtain, within 30 days, a signed and dated
acknowledgment of receipt of this Order or certify in writing that it has been unable to do so.

IX. COMPLIANCE REPORTING
IT IS FURTHER ORDERED that the Stipulating Defendant make timely submissions to
the FTC:

A. One (1) year after entry of this Order, the Stipulating Defendant must submit a
compliance report, sworn under penalty of perjury:

10

l.

the Stipulating Defendant s 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 the
Stipulating Defendant; (b) identify all of the Stipulating Defendant's
businesses by all of their 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
the Stipulating Defendant must describe if she knows or should know due
to her own involvement); (d) describe in detail whether and how the
Stipulating Defendant is in compliance with each Section of this Order;
and (e) provide a copy of each Order Acknowledgment obtained pursuant
to this Order, unless previously submitted to the FfC.

2.

Additionally, the Stipulating Defendant must: (a) identify all telephone
numbers and physical, postal, email, and Internet addresses, including all
residences; (b) identify a ll business activities, including any business for
which the Stipulating Defendant performs services whether as an
employee or otherwise and any entity in which the Stipulating Defendant
has any ownership interest; and (c) describe in detail the Stipulating
Defendant's involvement in each such business, including title, role,
responsibHities, participation, authority, control, and any ownership.

II

B. For ten ( l 0) years after entry of this Order, the Stipulating Defendant must submit a
compliance notice, sworn under penalty of per:jury, within 14 days of any change in the
following:
l . The Stipulating Defendant must report any change in: (a) any designated point of
contact; or (b) the structure of any entity that the Stipulating Defendant has any
ownership interest in or controls directly or indirectly that may affect compliance
obligations arising under this Order, 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, the Stipulating 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 the Stipulating Defendant
performs services whether as an employee or otherwise and any entity in which the
Stipulating Defendant has any ownership interest, and identify the name, physical
address, and Internet address of the business entity.
C. The Stipulating Defendant must submit to the FTC notice of the fi ling of any bankruptcy
petition or insolvency proceeding, or similar proceeding, by or against the Stipulating Defendant
within 14 days of its filing.
D. Any submission to the FTC required by this Order to be sworn under penalty of perjury
must be tme 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.

12

E. Unless otherwise directed by a FTC representative in writing, all submissions to the FTC
pursuant to this Order must be emailed to DEbrief@ftc.gov or sent by overnight 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 Inc.
X. RECORDKEEPING
IT IS FURTHER ORDERED that, for ten (I 0) years after entry of the Order, the
Stipulating Defendant must create and retain each such record for five (5) years. Specifically, the
Stipulating Defendant for any business that the Stipulating Defendant, individually or
collectively with any other Defendant, 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; j ob 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. AH records necessary to demonstrate full compliance with each provision of this Order,
including all submissions to the ITC; and
E. A copy of each unique advertisement or other marketing material.
XI. COMPLIANCE MONITORING
IT IS FURTHER ORDERED that, for the purpose of monitoring the Stipulating
Defendant's compliance with this Order, including the financial representations upon which part
of the judgment was suspended and any failure to transfer any assets as required by this Order:
13

A. Within fourteen (14) days of receipt of a written request from a representative of the
FTC, the Stipulating Defendant must: submit additional compliance rep011s 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
the Stipulating Defendant TI1e Stipulating Defendant must permit representatives of the FTC to
interview any employee or other person affiliated with her who has agreed to such an interview.
The person interviewed may have counsel present.
C. The FTC may use all other lawful means, includ ing posing, through its representatives as
consumers, suppliers, or other individuals or entities, to the Stipulating Defendant or any
individual or entity affiliated with the Stipulating Defendant, 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 of the FTC Act, 15 U.S.C. §§ 49, 57b- 1.

XII.

COOPERATION

IT IS FURTHER ORDERD that the Stipulating Defendant must fully cooperate with
representatives of the FTC in this case and in any investigation related to or associated with the
transactions or the occurrences that are the subject of the Complaint The Stipulating Defendant
must provide truthful and complete information, evidence, and testimony. The Stipulating
Defendant 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

14

notice, at such places and times as a FTC representative may designate, without the service of a
subpoena.

XIII. 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.

JUDGE BRJAN C. WIMES
UNITED STATES DISTRICT JUDGE

15

SO STIPULATED AND AGREED:

DARLA DRA~
Defendant
Approved as to form:

MARK A. OLTHOFF (MO #38572)
MICHAELS. FOSTER (MO #61205)
Polsinelli PC
900 W 48th Place
Suite 900
Kansas City, Missouri 64112-1895
Telephone: (816) 753-1000
Facsimile: (816) 753-1536
molthoff@"olsinelli.com
mfoster@polsinelli.com

Attorneys for Defendant Darla Drake

LEAH FRAZIER (DC #49254
GREGORY A. ASHE (VA #3'9131)
JASON M. ADLER (IL #6295738)
Federal Trade Commission
600 Pennsylvania Avenue 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
hwong@ftc.gov
lfrazier@fic.gov
gashe@.ftc.gov
jadler@ftc.gov

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
charles. thomas@usdoj. gov

Attorneys for Plaintiff'
Federal Trade Commission

16