Tether Sues Swan Bitcoin, Citing Misappropriation of Proprietary Information

Tether and Swan Bitcoin partnered in 2022 to establish a Bitcoin mining venture called 2040 Energy. Tether provided funding while Swan managed operations.

Bitcoin financial services company Swan Bitcoin has filed a lawsuit in the High Court of England and Wales against its former law firm, Gibson, Dunn & Crutcher, alleging legal malpractice in its handling of a dispute with a rival firm, Proton Management.

The lawsuit stems from a broader conflict between Swan and several of its former employees, who left the company in 2023 to establish Proton. Swan has accused these employees of misappropriating proprietary information to create the competing firm.

According to the complaint, Gibson, Dunn was initially retained by Swan to pursue legal action against Proton for allegedly using stolen trade secrets to undermine Swan’s role in a joint Bitcoin mining venture with Tether. However, the law firm later withdrew from the case after accepting Tether as a client, despite the conflict of interest.

Swan CEO Cory Klippsten has criticized the firm’s actions, stating that Gibson’s decision “blindsided” Swan and caused severe damage to its mining business.

The lawsuit alleges that Gibson, Dunn failed to adequately investigate the claims against Proton and neglected to inform Swan of the potential conflict of interest arising from its representation of Tether. As a result, Swan claims it lost the opportunity to pursue legal action against Proton, which ultimately led to the company being sold at a大幅 reduced valuation.

Klippsten has accused Tether of playing a role in the alleged coup attempt by its former employees, but Tether has denied any wrongdoing.

In a statement to CoinDesk, Tether said it “is aware of the allegations being made by Swan in this matter, but we are not named as a defendant in the case.”

“We acted fully within our contractual rights under the joint venture agreement and look forward to presenting our case in court,” the statement added.

The lawsuit provides a detailed account of the events leading up to the mass resignation of key employees from Swan, which culminated in the company being sold at a大幅 reduced valuation.

The complaint alleges that Tether’s advisor, Zach Lyons, encouraged Swan’s former employees to leave and suggested that Tether no longer saw value in Swan’s business. The lawsuit describes meetings where Lyons reportedly undermined Swan’s leadership and offered legal cover for the employees to create a copycat of Swan’s mining operations.

The alleged conspiracy caused massive turmoil for Swan Bitcoin. By July 22, the company 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 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 has denied any wrongdoing, stating it is aware of the allegations but is not named as a defendant in the case.

Legal experts noted that while the complaint implies Tether’s involvement, no direct legal claims have been made against the company.