Swan Bitcoin sues former employees over mining division dispute: lawsuit details and allegations.
Swan Bitcoin has filed a lawsuit against several former employees of its Bitcoin mining division, accusing them of misappropriation of proprietary and confidential software codes to create a competing company. According to the accusation, the former employees allegedly founded a new company, Proton Management, using the stolen material and convinced one of Swan’s partners, the stablecoin issuer Tether, to terminate its collaboration with Swan Bitcoin and collaborate with Proton.
The lawsuit, filed in court on September 25, alleges that this “coordinated plan” aimed to inflict irreversible competitive damage on Swan Bitcoin. The legal action accuses the involved parties of conspiring to sabotage Swan’s mining business from within, replacing it in the existing collaboration with Tether.
Involved individuals
According to Swan Bitcoin’s legal representatives, the main accused are Michael Holmes, former head of business development at Swan, and Raphael Zagury, former Chief Investment Officer and head of the company’s mining sector. The two allegedly orchestrated the plan, internally called “rain and hellfire”, using confidential information necessary to manage a mining operation.
The lawsuit describes a series of internal resignations that occurred between August 8 and 9, which reportedly caught Swan by surprise. A few days later, on August 12, Tether allegedly informed Swan of the decision to terminate the partnership, choosing to support Proton Management for financing mining operations. According to the lawsuit, Tether was supposed to provide “legal cover” for the hostile takeover.
Legal requests and financial implications
In response to these actions, Swan Bitcoin has requested a permanent injunction to prevent Proton from continuing to interfere with its mining activity. The company is also seeking to recover materials and equipment it believes were wrongfully taken, in addition to compensation, with the intention of bringing the matter to trial with the assistance of a jury.
From a financial perspective, the dispute concerns the joint project created between Swan Bitcoin and Tether, launched in early 2024 with the goal of reaching 100 exahash of computational capacity by 2026. However, due to short-term revenue management issues, Swan’s CEO, Cory Klippsten, had announced plans to close or sell the entire mining division as early as July 2024. The court document suggests that, at that time, Swan was considering completely ceding its mining activity to Tether.
The lawsuit suggests that the resignations and the creation of Proton could be attributed to this context of internal reorganization. Swan maintains that, while it was evaluating the closure of the sector, Tether was persuaded to redirect its funding towards Proton as part of a hostile plan orchestrated by former employees.
Swan has expressed its intention to proceed with a jury trial, requesting that the damages to be compensated be determined during the course of the proceedings.
