In a significant development in the cryptocurrency industry, stablecoin issuer Tether has filed a lawsuit against Bitcoin financial services company Swan Bitcoin, alleging substantial breaches of their agreements. The case, filed in the High Court of England and Wales, marks a pivotal escalation in the ongoing legal battles between the two companies. At the heart of the dispute lies their joint Bitcoin mining venture, 2040 Energy, which has seen allegations of sabotage, theft of proprietary information, and claims of a hostile takeover.
The Genesis of the Dispute: 2040 Energy
Tether and Swan Bitcoin established 2040 Energy in 2022 as a joint venture aimed at Bitcoin mining. Under this partnership, Tether provided funding, while Swan Bitcoin managed operations. However, the collaboration soon soured, with both parties trading accusations of misconduct and contractual breaches.
Swan Bitcoin accused Tether of facilitating what it called a “hostile takeover” of the mining operations. The company alleged that Tether colluded with a rival company, Proton Management, to undermine Swan’s role in 2040 Energy. Tether, in turn, denied these allegations, asserting that it acted within its contractual rights and adhered to the terms of the joint venture agreement.
Allegations Against Proton Management
Swan Bitcoin’s grievances stem from allegations that former employees from its mining division stole proprietary information, including software code and business strategies, to establish Proton Management. Swan described this as part of a scheme dubbed “rain and hellfire,” orchestrated by key personnel, including:
- Michael Holmes: Former Head of Business Development at Swan Bitcoin.
- Raphael Zagury: Ex-Chief Investment Officer and Mining Head at Swan Bitcoin, now the CEO of Proton Management.
According to Swan, Proton Management misused its trade secrets to position itself as a direct competitor in the Bitcoin mining market, causing “irreparable harm” to Swan’s ability to compete.
Proton’s Alleged Role in the Takeover
Court filings indicate that Proton Management convinced Tether to sever ties with Swan Bitcoin and support Proton in the mining venture instead. This alleged collusion resulted in significant changes to 2040 Energy’s operational structure:
- On August 12, 2024, Swan CEO Cory Klippsten was removed as CEO of 2040 Energy.
- Proton Management subsequently took over the operational and administrative functions of the mining operations.
These developments, Swan claims, effectively sidelined the company from its own joint venture, exacerbating tensions between the parties.
Tether’s Stance on the Allegations
Tether has consistently denied any wrongdoing in its dealings with Swan Bitcoin. In a statement released on January 15, 2025, Tether asserted:
“Throughout our relationship with Swan, Tether has consistently acted in good faith, supported mutual business objectives, and adhered to all relevant agreements. Conversely, Swan has acted recklessly, and their actions have resulted in significant breaches by them of the agreements between us. Consequently, we have been compelled to take necessary measures to protect our investment.”
The stablecoin issuer emphasized that its actions were aligned with the terms of the joint venture agreement and refuted claims of facilitating a hostile takeover.
Legal Action Against Gibson, Dunn & Crutcher
Adding another layer to the legal entanglement, Swan Bitcoin filed a malpractice lawsuit against its former law firm, Gibson, Dunn & Crutcher, in November 2024. The company accused the firm of abandoning its case against Proton after taking on Tether as a client. Swan argued that this move violated attorney ethics rules prohibiting lawyers from dropping a client to avoid conflicts of interest.
Cory Klippsten described the firm’s decision as a betrayal, stating:
“Swan was blindsided. Gibson’s move caused significant damage to Swan’s mining business.”
The lawsuit against Gibson underscores the far-reaching implications of the ongoing disputes, affecting not only the two primary parties but also their legal representation.
Tether’s Business and Legal Strategy
Tether’s lawsuit against Swan Bitcoin highlights its intent to safeguard its investments and maintain its position in the highly competitive Bitcoin mining sector. The legal action comes at a time when Tether is expanding its footprint in the Bitcoin ecosystem through investments in mining and proprietary blockchain technologies.
The stablecoin issuer’s strategy has been to assert its contractual rights while leveraging its financial resources to pursue legal remedies against perceived breaches of agreements. Tether’s denial of any impropriety in the Proton Management controversy aligns with its broader efforts to position itself as a credible and compliant player in the cryptocurrency space.
Impact on the Bitcoin Mining Industry
The disputes between Tether, Swan Bitcoin, and Proton Management have broader implications for the Bitcoin mining industry:
- Trust Issues in Joint Ventures: The case highlights the challenges of maintaining trust and transparency in joint ventures, especially in high-stakes industries like cryptocurrency mining.
- Data Security Risks: Swan’s allegations of trade secret theft underscore the importance of robust security measures to protect proprietary information.
- Market Competition: Proton Management’s emergence as a competitor raises questions about the impact of such disputes on market dynamics, particularly in an industry reliant on collaboration and innovation.
- Legal Precedents: The lawsuits may set legal precedents for how intellectual property and operational rights are handled in joint ventures involving digital assets.
What Lies Ahead?
The outcome of these legal battles will likely shape the future of the parties involved and could have far-reaching consequences for the cryptocurrency industry. Key questions include:
- Will Tether’s lawsuit against Swan Bitcoin succeed?
- How will the malpractice case against Gibson, Dunn & Crutcher unfold?
- What impact will these disputes have on Tether’s and Swan’s reputations in the cryptocurrency market?
The answers to these questions will depend on the evidence presented in court and the interpretation of contractual obligations by the judiciary.
Conclusion
The ongoing legal disputes between Tether, Swan Bitcoin, and Proton Management paint a complex picture of the challenges in the cryptocurrency and Bitcoin mining sectors. Allegations of trade secret theft, accusations of hostile takeovers, and claims of ethical violations have created a high-stakes battle with significant implications.
As these cases unfold, they highlight the importance of clear agreements, ethical practices, and robust security measures in joint ventures. For industry stakeholders, the disputes serve as a cautionary tale about the risks of partnerships in an emerging and highly competitive field.
While the legal proceedings may take time to resolve, they underscore the need for trust and accountability in the fast-evolving world of cryptocurrency. Both Tether and Swan Bitcoin face significant challenges in defending their positions, and the final outcomes could shape the future of their operations and the broader Bitcoin mining landscape.
