Swan Bitcoin is suing former employees, contractors, and two companies created by these former employees for alleged theft of elements of its bitcoin mining business.
“Over a period of several weeks in July and August, Defendants and other agents hatched and executed a ‘rain and hellfire’ plan to steal Swan’s billion-dollar Bitcoin mining business,” a court document dated September 25, 2024 reads.
Swan has filed the suit against the company’s former Investment Director, Patrick Furlong; former Head of Business Development, Michael Holmes; former Investment Analyst, Rafael Monteleone; former Investment Director, Santhiran Naidoo; former Junior Investment Analyst, Enrique Romualdez; former Software Engineer, Lucas Vasconcelos; and two companies allegedly formed by the defendants, Proton Management and Ilios Corporation.
Notably, Swan is not suing the defendants over theft of the physical infrastructure for its mining operation, ostensibly because of contractual ownership outlined in its partnership with Tether, which co-owns Swan’s mining business through a joint venture.
“The individual Defendants (all former Swan consultants) conspired to steal Swan’s highly proprietary and confidential Bitcoin mining business, technology, trade secrets, property and personnel, and then resigned near-simultaneously on the evening of August 8, 2024, to join Defendant Proton—a copycat company Defendant Holmes created for the sole purpose of using Swan’s stolen technology and trade secret techniques and methods to usurp its mining business,” Swan argues in the suit.
Swan is alleging that its former employees, in the weeks leading up to their resignation, “cloned and exfiltrated highly proprietary code from Swan’s Bitcoin mining monitoring software” from Swan’s GitHub. Swan refers to these documents and codes as the “crowned jewels” of its mining business.
“Defendants misappropriated thousands of documents and files containing Swan’s proprietary and confidential information and trade secrets: mining processes developed through testing, mining performance data, data related to Swan’s mining inventory, mining operations and machine performance and configuration, financial modeling and information, weekly reports of all operations, ongoing deals with Swan business partners, and pricing information,” Swan alleges in the filing.
Swan specifically labels defendant Michael Holmes as the “ringleader” of the accused parties, all of whom Swan claims “executed a pre-planned scheme” to “usurp Swan’s funding arrangement,” poach Swan staff, and use Tether as “‘legal cover’ for their misdeeds.”
Swan established its mining business in July of 2023 in a joint venture with stablecoin issuer Tether, which financed the operation. Swan began its mining business at a site in Tasmania, Australia before deploying additional hashrate at hosting sites in other areas. Per the filing, Swan and Tether’s joint venture managed 12 EH/s as of July 2024.
Days after the defendants’ mass resignation on August 8, 2024, Swan claims that Tether informed the company that it would put Proton Management in charge of the joint venture’s mining operations (notably, Swan is not bringing the suit against Tether).
Proton Management was incorporated in the British Virgin Islands on August 2, 2024, and Swan states in the filing that its former head of mining, Raphael Zagury, is Proton’s CEO.
In an email apparently penned by Zagury in the days leading up to the mass departure, he writes “Tether needs to send default notice,” without clarifying if this default notice is meant for Swan Bitcoin or if it is in relation to mining operations. This year, Swan Bitcoin ran into financial troubles, resulting in mass layoffs and forcing the beleaguered company to eschew its IPO aspirations.
This is a developing story and we will update with relevant information.
