Swan Bitcoin has initiated legal action against a group of former employees and consultants, claiming they devised and executed a “rain and hellfire” strategy to steal its lucrative bitcoin mining operations, allegedly with assistance from Tether, a former ally and fundraising partner.
The lawsuit targets six individuals accused of pilfering Swan’s trade secrets—including proprietary code, hash-rate optimization techniques, and financial models—to establish an “illegal facsimile” of Swan’s mining business, named Proton Management. According to the suit, after two months of planning, the group resigned “near-simultaneously” on August 8 to join Proton.
While Tether is not a named defendant in the lawsuit, Swan asserts that the stablecoin giant endorsed the actions of the former employees. A spokesperson for Tether has denied any wrongdoing.
In 2023, Tether had previously financed Swan’s mining operation in Tasmania and was in discussions for further investment, allegedly promising a $25 million lead in Swan’s Series C fundraising round, which would value the company at approximately $1 billion. At its peak in July, Swan was mining one out of every 50 bitcoins worldwide, with Tether’s CFO Giancarlo Devasini reportedly praising Swan’s CEO, Cory Klippsten.
However, the lawsuit claims that Tether was secretly undermining Swan. According to the complaint, Zach Lyons, an advisor for Tether, held clandestine meetings with Swan’s former head of mining, Raphael Zagary, and other employees starting in late June, suggesting that Swan had “no value” to Tether and encouraging them to leave for Tether or another operator.
During a meeting on July 11, Lyons allegedly warned Zagary and former Swan Investment Director Santhiran Naidoo that Tether could “take away [Swan’s mining business] tomorrow.”
With what Swan claims was Tether’s tacit approval, Zagary began fostering dissent within the company, which ultimately led to significant upheaval. The lawsuit states that the promised $25 million investment from Tether was rescinded, and by July 22, Swan was forced to abandon its IPO plans, shut down its managed mining unit, and lay off approximately 45% of its workforce.
On August 8, the defendants resigned en masse, which Swan’s legal team asserts took the company by surprise, despite claims that the defendants coordinated their actions using Swan’s email and corporate Zoom accounts.
The following day, Tether’s legal counsel served Swan with a “Notice of Event of Default,” alleging that Swan had breached their funding agreement due to its inability to “maintain the personnel necessary” for proper business operations. Consequently, Swan’s CEO, Klippsten, was compelled to resign from 2040 Energy, a related entity.
The lawsuit describes how Proton Management, created by Alex Holmes and led by Zagary and Naidoo, ultimately launched an operation mirroring Swan’s bitcoin mining business.
Ashley Ebersole, general counsel for 0x and a former SEC attorney, remarked that while Swan’s complaint suggests potential wrongdoing by Tether, no legal claims have been made against the company. She noted the complaint lacks substantial evidence against Tether and speculated that additional claims could arise if more information becomes available.
In response, Tether acknowledged the lawsuit, stating that while it is not a defendant, it denies any implications of misconduct. The company emphasized its commitment to principles such as financial freedom and sustainability while refraining from further comments due to the ongoing legal matter.
Swan Bitcoin’s lawsuit seeks permanent injunctions against the named defendants and demands restitution, disgorgement, and punitive damages from Proton Management.
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