Swan Bitcoin has filed a lawsuit against some of the former employees of its mining venture for allegedly stealing proprietary software and trade secrets to launch a competing firm, Proton Management.
In a Sept. 25 lawsuit filed with a Los Angeles federal court, Swan alleged that six of its former staffers conspired to “harm Swan’s ability to compete in the market” by stealing what the filing dubbed as “crown jewels” from its mining business.
Founded in 2019, Swan Bitcoin offers financial services for investors and branched out to the mining sector after launching Swan Mining in 2023. The complaint alleges that the defendants executed a pre-planned scheme called “rain and hellfire” to take over Swan’s mining business from the inside.
According to Swan, the former employees stole proprietary code for its mining monitoring software and thousands of confidential documents before resigning between Aug. 8 and Aug. 9.
Further, the defendants have been accused of soliciting key personnel and securing Swan’s business partners, including stablecoin issuer Tether. The firm behind USDT was specifically intended to provide “legal cover” for the misdeeds of the “copycat company,” the complaint added.
Tether, a key funding partner, replaced Swan with Proton in their mining agreement on Aug. 12, just days after the defendants resigned.
The duo had also launched a managed mining service for institutional investors, aiming to increase its capacity to 100 exahashes by 2026. The recent lawsuit could impact the future of these plans.
The complaint further reveals that Swan struggled with revenue issues in its mining division. Swan’s CEO Cory Klippsten told the community in July that the company might shut down its managed mining service. Around the same time, Swan reportedly considered selling its mining business to Tether.
Swan argues the stolen information helped Proton gain an unfair advantage in the competitive Bitcoin mining market.
The firm claims to possess evidence of the theft and subsequent cover-up attempts. It is filing the lawsuit to protect its rights, accusing the defendants of trade secret misappropriation, breach of contract, and aiding and abetting a breach of duty of loyalty.
Swan has requested a jury trial to determine the damages and asked the court to push for the return of stolen equipment and the confidential material in question while also seeking a permanent injunction.
Core business unaffected
Despite the legal tussle, Klippsten has assured the community that the financial services firm has had a profitable year, with a 132% year-on-year revenue increase, clarifying that the recent news doesn’t affect the core business since the mining arm is “separate and segregated.”
Swan’s revenue hike came on the back of new product rollouts, including the launch of the Bitcoin Individual Retirement Accounts in partnership with U.S.-based self-directed IRA provider Equity Trust Company. The offering allows Swan customers to manage Bitcoin within tax-advantaged retirement accounts.
