Swan Bitcoin lawsuit targets former executives, implicates Tether

Swan Bitcoin has filed a lawsuit against Proton Management, a bitcoin mining firm made up of former Swan consultants, claiming that these executives “hatched and executed a ‘rain and hellfire’ plan to steal Swan’s” mining business. 

Specifically, the suit alleges that several consultants who were a part of Swan’s Bitcoin mining operation allegedly planned to misappropriate Swan’s intellectual property to operate a “copycat company” that was also funded by Tether.

The lawsuit includes an email that appears to show a discussion about how best to execute the exit and says, “Tether needs to send default notice.”

Screenshot from the lawsuit.

The Timeline

According to the lawsuit, in June 2023, Swan Bitcoin CEO Cory Klippsten learned of a bitcoin mine in Australia that was trying to raise funding. He apparently discussed this opportunity with Giancarlo Devasini, the CFO of both Bitfinex and Tether, and the two agreed to form a joint venture with Swan providing management and Tether providing financing.

Additionally, the lawsuit reveals that Tether, through BFX Ventures, had previously invested in Swan.

The next month, then chief investment officer for Swan, Raphael Zagury, apparently began managing the Australian mining operations. This was helped by a group of consultants and employees, many of whom now work for Proton. 

According to the lawsuit, near the end of July 2023, Tether subsidiary Zettahash entered into an agreement with Swan to create 2040 Energy. This entity was funded by Tether, and a poorly redacted portion of the lawsuit reveals that Tether also “controlled 2040 Energy’s board of directors.”

Klippsten served as Swan’s sole director on the 2040 Energy board, and Tether CFO Giancarlo Devasini and Ludovicus Jan van der Velde (the former CEO of Tether and current CEO of Tether’s sister company, Bitfinex) served as Tether’s directors on the 2040 Energy board.

In February 2024, Tether and Swan began planning 2140 Energy to invest in a Tasmanian mining operation.

However, this agreement didn’t play out as imagined. Allegedly, the executives behind Swan’s bitcoin mining operation planned “rain and hellfire” by:

• downloading the ‘BNOC’ software
• creating a company
• having Tether provide “legal cover.”

In June 2024, Zach Lyons of Marlin Capital Partners, apparently a Tether advisor, allegedly communicated to Swan that Tether would be interested in investing in it.

However, days later, Zagury communicated to Swan that Tether was not interested in most of Swan; it was interested in mining and suggested spinning that off. 

Several days later, Zagury suggested Tether effectively force Klippstein to resign as CEO and accept ‘wind down capital’ in exchange for handing over the mining business.

Later in July, Zagury and Devasini apparently met and decided to add Zagury to the board of 2040 Energy and proposed moving 2040 Energy’s bitcoins to the custody of Zagury.

Also in July, Swan announced layoffs and the end of its Managed Mining Unit.

In early August 2024, several of these executives began to resign. An email was subsequently sent from Tether’s counsel that claimed, “I understand that most or all of the Swan Mining employees have resigned this morning. I have spoken with Tether and confirmed that these former employees were not encouraged to resign and have no existing arrangements with Tether.” 

Based on another poorly redacted part of the filing, Tether’s counsel sent a ‘Notice of Event of Default,’ to Swan’s counsel that claimed that “Swan breached the 2040 Energy Shareholders Agreement, providing the planned ‘legal cover’ against Swan for Defendant Proton to take Swan’s place in 2040 Energy and potentially beyond.

It claimed that the supposed ‘events of default’ included Swan’s alleged breach of the Shareholders Agreement because Klippsten “provided no assurances that Swan will be able to maintain the personnel necessary for Swan to procure that the business of 2040 Energy is conducted in accordance with the Investment Memos and sound business practices and commercial principles.”

Days later Klippstein resigned as CEO of 2040 Energy, in part because “Tether had accused Swan (again, his company) of breaching the Shareholders Agreement.”

Tether also apparently sent a ‘Notice of Continuing and Additional Breach,’ alleging again that “Swan had further breached the 2040 Energy Shareholders Agreement based on the resignations of ‘a substantial number of Swan employees responsible for carrying out and overseeing the ongoing business operations of 2040 Energy.'”

Tether’s counsel added, “Tether has engaged on the date hereof [Defendant] Proton Management Ltd., which entity has represented that it can supply the services of certain former employees of Swan, to procure that the business of 2040 Energy is conducted in accordance with the investment memos previously provided by Swan and sound business practice and commercial principles.”

Since then Swan has scuttled plans for a Series C fundraising round and IPO.

The dashboard and optimizations

One of the specific pieces of intellectual property that Proton Management took is apparently the Bitcoin Network Operating Center,  a dashboard that allows the mining firm to track some metrics related to the mining operations.

This dashboard can also be used to help analyze the profitability of bitcoin mining.

Additionally, Swan was apparently doing its own “proprietary” “overclocking and underclocking” procedure to increase the efficiency of its bitcoin mining operation. 

Additionally, it supposedly took documents related to client relationships.

Read more: We asked Swan CEO about layoffs, withdrawal times, and the canceled IPO

In addition to having to delay its IPO, Swan has also had to lay off employees and restructure the company following the decision to end the mining business. 

Protos has reached out to Tether and Swan for additional context on this lawsuit and will update if we hear back.

Got a tip? Send us an email or ProtonMail. For more informed news, follow us on X, Instagram, Bluesky, and Google News, or subscribe to our YouTube channel.