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Cryptocurrency News Articles
Swan Bitcoin Sues Ex-Employees, Consultants, and Tether, Alleging They Orchestrated a Plan to Steal Its Business
Sep 28, 2024 at 05:05 am
The suit claims six individuals misappropriated Swan's trade secrets—including proprietary code and financial models—before launching a rival mining venture called Proton Management.
Swan Bitcoin has filed a lawsuit against several former employees and consultants, alleging that they orchestrated a plan to steal its bitcoin mining business with the help of Tether, Swan’s former fundraising partner.
The lawsuit, filed in Delaware Chancery Court on Monday, claims that six individuals misappropriated Swan’s trade secrets—including proprietary code and financial models—before launching a rival mining venture called Proton Management.
The lawsuit does not name Tether as a defendant but accuses it of providing tacit support for the scheme. Tether previously funded Swan’s bitcoin mining operations in Tasmania and had entered talks to lead Swan’s $25 million Series C fundraising round, which would have valued Swan at $1 billion.
According to the complaint, Tether’s advisor, Zach Lyons, allegedly encouraged Swan’s former employees to leave and suggested that Tether no longer saw value in Swan’s business. The lawsuit details meetings where Lyons reportedly undermined Swan’s leadership and offered legal cover for the employees to create Proton Management, a copycat of Swan’s mining operations.
The alleged conspiracy caused massive turmoil for Swan Bitcoin. By July 22, the company had dropped its initial public offering (IPO) plans, shut down its managed mining unit, and laid off 45% of its staff. Swan’s valuation plummeted as the promised $25 million funding from Tether never materialized.
On Aug. 9, Tether’s legal team sent Swan a “Notice of Event of Default,” claiming Swan had breached its funding agreement due to its inability to maintain the necessary personnel. This was followed by the engagement of Proton Management, the new entity formed by Swan’s former employees, which claimed to offer the services of the same team that had left Swan.
For its part, Tether denied any wrongdoing, stating it is aware of the allegations but is not named as a defendant in the case.
“We are aware of the allegations made in the complaint filed by Swan Bitcoin, however, Tether is not named as a defendant in the case,” a Tether spokesperson told Blockworks in an email. “We can confirm that Tether fully performed its obligations under the relevant agreements with Swan Bitcoin and that Swan Bitcoin is in material breach of those agreements.”
Legal experts noted that while the complaint implies Tether’s involvement, no direct legal claims have been made against the company. Swan is seeking permanent injunctions, restitution, and punitive damages against Proton Management and the other named defendants.
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