Swan Bitcoin Sues Former Execs for Alleged Collusion with Tether to Steal Bitcoin Mining Operation

Swan Bitcoin took legal action this week against several former employees and a competitor, Proton Management. The company accused them of a deliberate attempt to undermine and seize its Bitcoin mining operations.

This ongoing legal dispute in the US District Court for the Central District of California underscores an alleged betrayal by individuals previously entrusted with the confidential aspects of Swan’s software and business connections.

The allegations paint a picture of corporate espionage where former Swan employees allegedly sabotaged the company from within. They allegedly stole critical software code and customer data. After resigning, they used this information to start a new company, Proton Management. Their goal was to compete directly with their former employer.

On X, Swan CEO Cory Klippsten said that the company’s mining operations have always been “separate and segregated.” He added that the latest news does not impact Swan’s primary business.

+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

Swan Bitcoin Claims Ex-CIO and Business Head Orchestrated Mining Takeover Plan

In the lawsuit, Michael Holmes, once Swan’s Business Development Head, was identified as the mastermind behind Proton. Meanwhile, Raphael Zagury, who previously held the roles of CIO and mining chief at Swan, has taken the helm as Proton’s CEO.

According to the complaint, Proton employees were also accused of poaching staff from Swan’s mining team and redirecting Swan’s financial backer, Tether, to support their own operations. Part of the plan, Swan alleged, involved Tether issuing a default notice to Swan, which would serve as a legal pretext for the hostile takeover.

Swan said it was caught off guard by a wave of resignations on Aug. 8 and 9. Another surprise allegedly followed on Aug. 12 when Tether informed the company that Proton would be taking over its role in the mining agreement.

Tether, although not officially a defendant in the lawsuit, acknowledged the accusations, but rejected any suggestions of misconduct. “As this is an ongoing legal matter, we will refrain from providing further comment at this time,” the company said.

Swan Demands Permanent Injunction in Lawsuit Over Alleged Misconduct by Ex-Employees and Tether

Further, Swan asserts that this misconduct not only breaches contractual confidentiality but also inflicts immediate and irreversible damage to its operations, potentially leading to the loss of business opportunities and a tarnished reputation. The legal complaint suggest a calculated strategy where the former employees, alongside Tether, sought to dismantle Swan’s mining business from the inside out.

Swan has requested request for a permanent injunction against Proton and for the return of misappropriated materials. The outcome of this lawsuit could set a precedent for how intellectual property disputes are handled in the crypto industry.

Swan Bitcoin launched its managed mining service for institutional investors with Tether in May 2024, aiming for 100 exahashes by 2026. However, by July, CEO Cory Klippsten announced the managed mining operation was likely to shut down due to struggles in generating enough revenue quickly. At the same time, the company proceeded with workforce cutbacks and decided against going public.