Swan Bitcoin sues ex-staff for stealing mining business secrets

Swan Bitcoin has filed a lawsuit accusing former employees of stealing its software code and using it to form a competing Bitcoin (CRYPTO:BTC) mining business.

The lawsuit, filed on September 25, claims that these ex-employees created Proton Management, a "counterfeit competitor" to Swan’s mining operations.

According to the filing, the former staff allegedly convinced Tether (CRYPTO:USDT), a key funding partner, to cut ties with Swan and collaborate with Proton instead.

The lawsuit states that this plan was intended to “irreparably harm Swan’s ability to compete in the market.”

The court documents also reveal that the group referred to their strategy as “rain and hellfire.”

Swan’s former Head of Business Development, Michael Holmes, and ex-Chief Investment Officer and mining head, Raphael Zagury, are identified as the main orchestrators of this scheme.

The lawsuit alleges that Holmes and Zagury stole confidential business information and trade secrets critical to operating a Bitcoin mining business.

Swan stated that the company was blindsided by mass resignations on August 8 and 9, followed by a notice from Tether on August 12, informing Swan that Proton would replace them in the mining funding agreement.

The legal filing further claims that Tether provided "legal cover" for the takeover of Swan’s business.

Swan originally launched a managed mining service for institutional investors through its partnership with Tether in May 2024, with plans to reach 100 exahashes of computing power by 2026.

However, CEO Cory Klippsten had recently hinted at the potential closure of the mining arm due to revenue challenges.

Swan is seeking a permanent injunction to prevent Proton from further disrupting its business, along with compensation for damages.

The company has requested a jury trial to determine the extent of the damages and the return of its stolen equipment and confidential materials.