Tether Accused of Conspiring to Steal Its Partner's Bitcoin Mining Business

Tether’s mining business faced legal turmoil as Swan Bitcoin accused it of stealing trade secrets. The dispute over their joint venture, 2040 Energy, escalated into a lawsuit, with Swan alleging Tether conspired to poach employees and proprietary data. Tether denies wrongdoing.

Observers

Sep 29, 2024 - 1 min read

In 2023, Tether, through its subsidiary Zettahash, entered into a strategic partnership with Swan Bitcoin to establish 2040 Energy, a Bitcoin mining joint venture. The collaboration was aimed at expanding Tether’s presence in the Bitcoin mining industry by leveraging Swan Bitcoin’s expertise.

The first mining sites for 2040 Energy were identified in Texas and Paraguay. The companies jointly invested in infrastructure and secured long-term energy contracts. However, during this period, Swan Bitcoin alleged that Tether and Zettahash had begun acting independently, excluding Swan from key decision-making processes.

In October 2023, Swan Bitcoin formally accused Tether of misappropriating trade secrets and proprietary mining strategies that had been shared under confidentiality agreements. According to Swan, Tether had used this privileged information to independently advance its own mining operations under Zettahash, effectively sidelining Swan from the venture.

The dispute escalated when Swan Bitcoin filed a lawsuit against Tether and Zettahash, alleging breach of contract, theft of trade secrets, and unfair business practices.

Swan alleged that former employees of its mining division had stollen proprietary information, including software code and business strategies, to establish a rival company, Proton Management. Some of the key figures in this alleged plan included Michael Holmes, Swan’s former head of business development, and Raphael Zagury, its ex-chief investment officer and mining head, who now serves as Proton’s CEO.

Swan claimed that Tether orchestrated and “procured” the resignations of Swan’s employees and “engaged in a conspiracy” with them to steal Swan’s bitcoin mining business.

Tether, while denying the allegations, stated that the partnership had failed due to "irreconcilable differences" and conflicting strategic visions. Meanwhile, Swan Bitcoin vowed to continue legal action, seeking damages for lost investment and intellectual property theft.