Swan Bitcoin has initiated a lawsuit against several former employees of its mining division, claiming they stole proprietary software and trade secrets to establish a competing firm, Proton Management.
In a complaint filed on September 25 in a Los Angeles federal court, Swan alleges that six of its ex-staff members conspired to undermine the company’s competitive position by pilfering what the lawsuit refers to as the “crown jewels” of its mining operations.
Founded in 2019, Swan Bitcoin expanded into the mining sector with the launch of Swan Mining in 2023. The lawsuit claims the defendants executed a premeditated scheme, dubbed “rain and hellfire,” to sabotage Swan’s mining business from within.
According to the allegations, the former employees absconded with proprietary code for Swan’s mining monitoring software, as well as thousands of confidential documents, shortly before resigning between August 8 and August 9. Furthermore, they are accused of soliciting key personnel and securing business partnerships, including a critical relationship with stablecoin issuer Tether. The complaint suggests that Tether was intended to provide “legal cover” for the activities of the “copycat company.”
Notably, just days after the defendants left, Tether replaced Swan with Proton in their mining agreement on August 12. Proton has since launched a managed mining service targeting institutional investors, aiming to ramp up its capacity to 100 exahashes by 2026. The lawsuit could significantly impact these ambitions.
The complaint also highlights Swan’s struggles with revenue in its mining division. CEO Cory Klippsten indicated to the community in July that the company might discontinue its managed mining service and had even considered selling its mining operations to Tether.
Swan contends that the information taken by the former employees gave Proton an unfair edge in the competitive Bitcoin mining market. The company claims to have evidence of the theft and subsequent attempts to cover it up, and is seeking to protect its rights by accusing the defendants of trade secret misappropriation, breach of contract, and aiding and abetting a breach of loyalty.
Swan is requesting a jury trial to determine damages, a return of the stolen equipment and confidential materials, and a permanent injunction against the defendants.
Core Business Remains Strong
Despite the ongoing legal battle, Klippsten has reassured stakeholders that Swan Bitcoin has had a profitable year, reporting a 132% year-on-year revenue increase. He emphasized that the recent developments will not affect the core business, as the mining division operates separately.
The revenue growth has been bolstered by new product launches, including Bitcoin Individual Retirement Accounts developed in partnership with Equity Trust Company, a U.S.-based self-directed IRA provider. This new offering allows Swan customers to manage Bitcoin within tax-advantaged retirement accounts.
