🌎 Swan Bitcoin Sues Ex-Employees Over Stolen Mining Trade Secrets

Swan Bitcoin has filed a lawsuit against several former employees of its mining venture, alleging the theft of proprietary software and trade secrets to launch a competing firm, Proton Management.

Allegations of Misconduct

In a lawsuit filed on September 25 with a Los Angeles federal court, Swan claims that six former staff members conspired to “harm Swan’s ability to compete in the market” by stealing what the filing describes as the “crown jewels” of its mining business.

Founded in 2019, Swan Bitcoin offers financial services for investors and expanded into the mining sector with the launch of 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 within.

According to Swan, the former employees stole proprietary code for its mining monitoring software and thousands of confidential documents before resigning between August 8 and August 9.

Accusations Against Defendants

The defendants are also accused of soliciting key personnel and securing Swan’s business partners, including stablecoin issuer Tether. The complaint adds that Tether was intended to provide “legal cover” for the misdeeds of the new “copycat company.”

Just days after the defendants resigned, Tether replaced Swan with Proton in their mining agreement on August 12. Proton 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 these plans.

Swan’s Financial Struggles

The complaint reveals that Swan has faced revenue issues in its mining division. Swan’s CEO Cory Klippsten informed 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 that the stolen information helped Proton gain an unfair advantage in the competitive Bitcoin mining market. The firm claims to have evidence of the theft and subsequent cover-up attempts. The lawsuit aims to protect Swan’s rights, accusing the defendants of trade secret misappropriation, breach of contract, and aiding and abetting a breach of duty of loyalty.

Legal Actions and Requests

Swan has requested a jury trial to determine the damages and asked the court to mandate the return of stolen equipment and confidential material. The company is also seeking a permanent injunction.

Core Business Remains Strong

Despite the legal challenges, CEO Cory Klippsten has assured the community that Swan Bitcoin’s financial services have had a profitable year, with a 132% year-on-year revenue increase. He clarified that the recent news doesn’t affect the core business since the mining arm is “separate and segregated.”

Swan’s revenue boost is attributed to new product rollouts, including the launch of Bitcoin Individual Retirement Accounts in partnership with U.S.-based self-directed IRA provider Equity Trust Company. This offering allows Swan customers to manage Bitcoin within tax-advantaged retirement accounts.