Former Swan Bitcoin Employees Sued for Stealing Trade Secrets to Start Competing Business
Date: 2024-09-27 Author: Henry Casey Categories: BUSINESS
Swan Bitcoin filed the lawsuit in federal court in Los Angeles on September 25, 2024, alleging that six of the company’s former employees intentionally stole software and trade secrets to start their own cryptocurrency mining company, Proton Management.
Swan, which was founded in 2019 and has been mining since 2023, said the former employees hatched a “fire and rain” plan to take over the business from within. The company says the former employees stole source code for mining monitoring software, as well as thousands of confidential documents, before resigning on August 8 and 9.
The defendants are also accused of poaching key Swan employees and partners. Specifically, the lawsuit names Tether, a well-known issuer of the USDT stablecoin, which was one of Swan’s key partners. According to the lawsuit, Tether provided “legal cover” for the replica business and signed a contract with Proton instead of Swan on August 12, just days after the layoffs.
Proton, in turn, offered a managed mining service to institutional investors and planned to increase its production capacity to 100 exahashes by 2026. However, this lawsuit could disrupt the company’s future plans.
The lawsuit also highlights that Swan has recently experienced financial difficulties in the mining business. In July, the company’s CEO, Corey Klippsten, said the firm may shut down its managed mining service and even considered selling the mining division to Tether.
Swan claims that the stolen data gave Proton a competitive advantage in the Bitcoin mining market. The company claims to have evidence of theft and attempts to cover it up. In the lawsuit, Swan accuses former employees of misappropriation of trade secrets, breach of contract, and aiding and abetting breach of duty of loyalty.
Swan is seeking a jury trial to determine the amount of damages. The company is also asking the court to return the stolen equipment and confidential materials, as well as a permanent injunction.
The core business is unaffected
Despite the lawsuits, Klippsten assured the community that Swan Bitcoin's core business remains profitable. The company has seen revenue growth of 132% year-on-year, driven by the launch of new products such as Bitcoin IRAs, developed in partnership with US-based Equity Trust.
