Bitcoin company Swan alleged in a lawsuit filed Wednesday that ex-employees of the company, including former executives, conspired to execute a “rain and hellfire” plan to usurp the firm’s Bitcoin mining business.
The company further alleges that the scheme was aided by Tether, the cryptocurrency giant responsible for issuing the industry's largest stablecoin by market capitalization, USDT.
The complaint, filed in the U.S. District Court for the Central District of California, alleges that the former employees stole “highly proprietary code” from Swan’s Bitcoin mining monitoring software, in addition to stealing its vendors and business partners. The employees conspired to resign en masse and create a competing company called Proton Management, Swan Bitcoin alleges.
“The evidence of Defendants’ brazen theft is overwhelming,” Swan’s lawyers said in the complaint. “[The former employees] were stealing the crown jewels from Swan’s Bitcoin mining business.”
Proton’s employees also allegedly solicited Swan’s mining personnel, in addition to appropriating Swan’s financing partner Tether for its own operations in an attempt to “irreparably harm Swan’s ability to compete in the market,” the complaint states. The scheme, in part, hinged on Tether delivering Swan with a "default notice" that would provide the "legal cover" for the hostile takeover, Swan alleges.
Just four days after the employees resigned from Swan, including the company's former Chief Investment Officer and Head of Mining Raphael Zagury, "Tether, Swan’s funding partner in its mining operation, notified Swan that Defendant Proton would be taking over 'day-to-day' Bitcoin mining management in their joint venture," the lawsuit states.
Swan is seeking a permanent injunction against Proton that would prevent the company from further disrupting Swan's mining business and is asking the court to compel the former employees to return stolen equipment and "confidential material." Swan has asked the court for a jury trial and for damages to be determined at trial.
Decrypt reached out to Swan, Tether, and Proton, and we will update this story if and when they respond to our requests for comment.
This is a developing story and will be updated.