TLDR
- Swan Bitcoin sues former employees for allegedly stealing mining business
- Ex-staff accused of founding competitor Proton Management
- Lawsuit claims theft of software code and confidential information
- Tether allegedly cut ties with Swan to work with Proton instead
- Swan seeks injunction, return of stolen materials, and damages
Swan Bitcoin, a Bitcoin financial services firm, has filed a lawsuit against several of its former employees, accusing them of stealing proprietary information to create a competing Bitcoin mining business.
The lawsuit, filed on September 25, 2024, alleges that the ex-staff members orchestrated a plan to take Swan’s mining business from within the company.
According to the court filing, the former employees, led by Michael Holmes, Swan’s former Head of Business Development, and Raphael Zagury, the company’s former chief investment officer and mining head, founded a new company called Proton Management.
Swan claims that these individuals stole confidential software code and business information crucial to operating a Bitcoin mining business.
The lawsuit states that the ex-employees dubbed their plan “rain and hellfire,” intending to “irreparably harm Swan’s ability to compete in the market.” Swan alleges that the former staff members resigned en masse on August 8 and 9, 2024, catching the company off guard.
+132% YoY 🚀 @Swan financial services revenue is up big.
Been an awesome last 12 months of product launches (Swan IRA, Swan Vault), excited for more geo and product launches soon 😎
Mining has always been separate and segregated. Recent news does not affect our core business.
— Cory Klippsten 🦢 Swan.com (@coryklippsten) September 27, 2024
One of the key allegations in the lawsuit involves stablecoin issuer Tether, which had been a funding partner for Swan’s mining operations.
Swan claims that the former employees convinced Tether to end its partnership with Swan and instead work with Proton Management.
On August 12, 2024, Tether reportedly informed Swan that it would be replaced by Proton in their mining funding agreement.
The lawsuit suggests that this move was part of a larger scheme to execute a hostile takeover of Swan’s mining business. Swan’s attorneys argue that Tether was meant to provide “legal cover” for this takeover attempt.
Swan Bitcoin had previously launched a managed mining service for institutional investors through a partnership with Tether in May 2024.
The goal was to reach 100 exahashes of computing power by 2026. However, in July 2024, Swan’s CEO Cory Klippsten had announced that the managed mining business would likely close due to insufficient near-term revenue.
The court filing reveals that around the time of this announcement, Swan had been considering selling its entire Bitcoin mining business to Tether.
This information provides context for the alleged actions of the former employees and their creation of Proton Management.
In response to these alleged actions, Swan is seeking several remedies through the court. The company has requested a permanent injunction against Proton to prevent further disruption of Swan’s mining business.
Additionally, Swan is asking the court to compel its former employees to return any stolen equipment and confidential materials.
The lawsuit also seeks unspecified damages, to be determined at trial. Swan has requested a jury trial to resolve the dispute.
As of the time of reporting, neither Proton Management nor Tether had provided comments on the allegations. The lawsuit remains in its early stages, and it is unclear how it will progress through the legal system.
