Butterfly dies in "Happiness 1" at the hand of Alex but because Alex re-create the old timelines at the end of that game Butterfly also returns to life.
But then Butterfly dies again at the end of "Milker" , this time his death is permanent.
The SYSTEM decides he doesn't deserve to go to the village (heaven) due to his past actions and his defiance of the SYSTEM.
instead he is sent to the Null's torture world (hell) and sentenced to be tortured there by Destiny for all eternity.
He would have stayed there forever if it weren't for Reeva who set him free and helped him escape Hell and back to the real world .