Swan Bitcoin Claims Ex-Employees ‘Stole’ its Mining Business at Tether’s Direction

The legal action alleges that six workers have been taking Swan’s confidential business information, such as exclusive source code, rate optimization methods for hash rates, and financial models, to establish an unlawful replica of Swan’s bitcoin mining operation called Proton Management. Over a period of two months, they are said to have stolen and strategized, culminating in their sudden resignations “almost simultaneously” on August 8th, to join Proton.

As Swan claims, it was with approval from Tether that the defendants carried out these actions. However, it’s important to note that Tether itself is not listed as a defendant in the lawsuit. A representative from the company has refuted any allegations suggesting they were involved in any wrongdoing.

Previously, the prominent stablecoin company financed Swan’s bitcoin mining project located in Tasmania, Australia (in 2023), and by February, discussions about additional funding began between the two parties. As stated in the lawsuit, an advisor representing Tether – Zach Lyons from Marlin Capital Partners – informed Swan that Tether would spearhead Swan’s series C fundraising round with a $25 million investment, thereby valuing Swan’s business at a staggering $1 billion.

Swan, aiming to become a public company, was experiencing positive developments. By July, as stated in the lawsuit, it was reportedly mining one out of every 50 bitcoins globally. Tether’s Chief Financial Officer, Giancarlo Devasini, appeared to express approval of Swan’s CEO, Cory Klippsten, on several occasions, expressing his opinion that Klippsten was the top CEO in the industry.

But, while praising Klippsten and pledging funding, Swan says Tether was double-dealing. According to the suit, Lyons began taking secret meetings with Swan’s former head of mining Raphael Zagary in (who is not named as a defendant in the suit) and other employees in late June, telling them that Swan had “no value” to Tether and suggesting that Swan’s employees could potentially leave Swan and go to Tether or another operator and “keep doing what [they’re] doing.”

At a gathering on the 11th of July, it’s claimed that Lyons communicated to Zagary and the ex-Investment Director of Swan, Santhiran Naidoo, that Klippsten should understand Tether could terminate Swan’s mining business at any moment.

According to Swan’s assertion, in mid-July, Zagary, with an implied approval from Tether and a promise of legal support for a controversial move, supposedly started causing unrest and chaos within Swan. This included discrediting Klippsten, influencing Swan’s advisors to depart from Swan, and undermining the company itself. It later turned out that the $25 million investment Tether had promised was no longer forthcoming.

Due to the turmoil, Swan was compelled to abandon their Initial Public Offering (IPO) plan by July 22, close their managed mining division, and let go approximately 45% of their employees. Their estimated worth allegedly plummeted, causing them to return to the market in search of investment at a substantially lower valuation.

On August 8th, a large number of defendants simultaneously resigned from Swan, an action which Swan’s legal team claims took them by surprise. However, it is alleged that the defendants were using their Swan email addresses and corporate Zoom accounts to conspire with each other and Tether even before resigning.

On the following Friday, August 9th, Tether’s legal team delivered the promised “legal protection” to Swan, as claimed in the lawsuit (with certain portions inappropriately blacked out). This delivery was reportedly made through a “Notice of Event of Default,” alleging that Swan had violated their business agreement with Tether under 2040 Energy. Specifically, it was stated that Swan failed to keep the required staff to manage operations effectively.

On the following Monday, Swan announced that Klippsten stepped down as CEO of 2040 Energy. Coincidentally, Tether’s legal team reportedly disclosed to Swan that they had hired Proton Management, a company asserting it could provide the services of some former employees of Swan.

Subsequently, it was discovered that the Defendants, along with their conspirators, successfully carried out a takeover against Swan. The defense Proton, developed by Alex Holmes, headed by CEO Zagury and CIO Naidoo, had illegally replicated Swan’s Bitcoin mining business.

Ashley Ebersole, 0x’s general counsel and a previous SEC lawyer, informed CoinDesk that Swan’s grievance appears to suggest Tether may be acting suspiciously, yet there are no actual legal accusations leveled against them.

In summary, Ebersole stated that the complaint against Tether appears weak in terms of providing proof of misconduct, and Tether is not initially named as a defendant. This could imply that there might not be enough evidence to substantiate any accusations against Tether at this time. However, complaints can be revised if further evidence surfaces during the investigation process.

A representative from Tether informed CoinDesk that they are “conscious of the more recent accusations, which stem from a lawsuit, concerning a Tether-affiliated company specialized in proprietary mining and various investments.

Though Tether isn’t directly involved in the court case, we’ve paid attention to the allegations and firmly reject any suggestions of misconduct. We remain dedicated to fostering financial independence, academic advancement, ecological sustainability, and data autonomy. Our actions and behavior align with these principles. Since this is a developing legal issue, we won’t offer more insights for now. We’ll keep track of the lawsuit and share updates as needed. For now, Tether’s regular operations carry on as planned.

Swan is asking for a long-term court order to stop the named defendants, as well as requesting compensation, return of profits, and additional penalties, to be paid by Proton.