Swan Bitcoin has accused several former employees of “stealing the crown jewels” from its Bitcoin mining business to create a “counterfeit competitor.”
Bitcoin financial services firm Swan Bitcoin has filed a lawsuit against several former employees from its mining arm, alleging they stole the firm’s software code, resigned and then used that code to kickstart their own mining business.
The ex-staff supposedly founded “counterfeit competitor” firm Proton Management and convinced one of Swan’s funding partners, stablecoin issuer Tether, to cut ties with Swan and work with them instead.
This was intended to “irreparably harm Swan’s ability to compete in the market,” Swan’s attorneys alleged in the Sept. 25 court filing.
“They hatched a plan to steal Swan’s mining business from the inside, usurp Swan’s role, and cut Swan out from the Tether joint venture. They dubbed it ‘rain and hellfire.’”
“[They] were stealing the crown jewels from Swan’s Bitcoin mining business,” it added.
Source: Cory Klippsten
Swan’s former Head of Business Development, Michael Holmes, is Proton’s “ringleader,” while Raphael Zagury — Swan’s former chief investment officer and mining head — serves as Proton’s CEO, according to the filing.
Swan alleged that the two were largely responsible for executing the “rain and hellfire” plan, which involved stealing Swan’s confidential and proprietary business information and trade secrets necessary to operate a Bitcoin mining business.
Swan said it was “blindsided” by a spree of resignation letters on Aug. 8 and 9, and then on Aug. 12, Tether sent Swan a notice informing them that it would be replaced by Proton in the mining funding agreement.
Excerpt from Swan Bitcoin’s lawsuit. Source: PACER
Tether would supposedly provide “legal cover” for the hostile takeover, according to the filing.
Swan initially launched a managed mining service for institutional investors through a partnership with Tether in May 2024, with the aim to reach 100 exahashes of computing power by 2026.
However, in July, Swan’s CEO Cory Klippsten informed the community that its managed mining business would likely close, citing issues with sustaining sufficient revenue in the near term.
The court filing suggests that around that time, Swan had been contemplating entirely offloading its Bitcoin mining business to Tether.
Excerpt from Swan Bitcoin’s lawsuit. Source: PACER
Swan is seeking a permanent injunction against Proton to prevent it from further disrupting Swan’s mining business. Klippsten’s firm is also asking the court to compel its former employees to return stolen equipment and “confidential material.”
Swan asked the court for a jury trial and for damages to be determined at trial.
