Here’s What Swan Bitcoin Redacted in Mining Lawsuit Involving Tether

Swan Bitcoin, a financial services firm that recently ventured into bitcoin mining, has filed a lawsuit against several former executives for allegedly stealing its mining segment in a ‘rain and hellfire’ coup.

The revelation of the lawsuit on Thursday garnered industry attention, particularly given the size of Swan’s mining fleet, which was reportedly under 12 EH/s, and the involvement of stablecoin giant Tether.

In essence, Swan accused multiple former executives and contractors of orchestrating a coup by resigning en masse, stealing Swan’s proprietary mining software, and forming a new company to continue managing the mining business for Tether.

Swan did not name Tether as a defendant in the suit and redacted many parts of the complaint that concerned the stablecoin giant. However, the redactions were inadequately imposed, making it easy to recover the concealed content.

Notably, Swan redacted the section of the complaint where it alleged that Tether “procured” the mass resignations of Swan’s employees and “engaged in a conspiracy” with them to steal Swan’s bitcoin mining business. Additionally, Swan originally hid details in the legal complaint that indicated Tether controlled the board of directors of the mining joint venture established by the two parties.

According to the complaint, Swan and Tether formed an entity called 2040 Energy in July 2023 under a shareholder agreement to engage in the bitcoin mining business. Swan said that by July 2024, it was managing just under 12 EH/s of hashrate. Swan alleged that the defendants resigned from the company in a pre-planned scheme on August 8, which was followed by a Notice of Default sent to Swan by Tether.

The default notice, which was also initially redacted, accused Swan of breaching the shareholder agreement because “Klippsten provided no assurances that Swan will be able to maintain the personnel necessary for Swan to ensure that the business of 2040 Energy is conducted in accordance with the Investment Memos and sound business practices and commercial principles.”

Swan denied in the legal complaint the accusations notified by Tether and said the defendants began plotting the alleged scheme in the months leading to July 22. That was when Swan’s CEO Cory Klippsten announced on X that Swan was “unlikely to continue” with its managed mining business in the near term and that the company was laying off some of its team members.

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Redacted sections of the original complaint, attached at the end of this article, are highlighted in bold below.

Page 4

7. Four days later [Aug 12], Tether, Swan’s funding partner in its mining operation, notified Swan that Defendant Proton would be taking over “day-to-day” Bitcoin mining management in their joint venture, citing the departure of a substantial number of Swan employees responsible for carrying out and overseeing the ongoing business operations.

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61. Tether funded 2040 Energy and 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, Bitifinex) served as Tether’s directors on the 2040 Energy board.

62. Like Swan’s employment and consultant agreements, the 2040 Energy Shareholders Agreement contains a broad confidentiality provision, which provides that: “Each party hereby severally undertakes with each of the other parties and with [2040 Energy] not, at any time during the term of this Agreement or at any time thereafter, to use or divulge or communicate to any person, (other than to his or its or the [2040 Energy’s] professional advisers (each of whom shall be bound by a duty of confidentiality) or on the instructions of the Board (acting with Investor Consent) any Confidential Information.”

Page 29

101. Also on August 9, 2024, as the Defendants and Swan conspirators had planned and, on information and belief orchestrated, Tether’s counsel served upon Swan’s counsel a carefully timed and detailed “Notice of Event of Default,” dated that same day, baselessly claiming 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. For example, 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.”

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102. On August 12, 2024, Klippsten was forced to resign as CEO of 2040 Energy because it was clear Swan (his company) was being pushed out of that funding arrangement; Tether had accused Swan (again, his company) of breaching the Shareholders Agreement; and based on his conclusion that Devasini and van der Velde, as the controlling directors of 2040 Energy, had played a role in stealing Swan’s mining team and business and were not acting in good faith.

103. Also on August 12, 2024, Tether’s counsel sent Swan 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.

104. In that August 12, 2024 notice, Tether’s counsel wrote further: “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.”

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108. On August 13, 2024, Swan, through counsel, responded to the August 9 Notice of Event of Default and August 12 Notice of Continuing and Additional Breach. Swan “rejected” the claims “in their entirety” and explained why they were “entirely without merit.” Based on its nascent investigation, Swan’s counsel explained that the breach claims based on the Defendants’ and Swan conspirators’ resignations in particular “is galling.” Swan further notified Tether that evidence shows “Tether itself procured the Employee Resignations and has been engaged in a conspiracy with those former Swan employees to seal for Tether’s benefit Swan’s [B]itcoin mining business.”

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110. On August 14, 2024, Tether’s counsel responded to Swan’s letter, requesting that Swan provide information concerning “specific steps proposed to be undertaken by Swan to ensure that the business of [2040 Energy] continues to be conducted as contemplated by the Shareholders Agreement.”

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112. Accordingly, on August 19, 2024, Swan (through counsel) described to Tether’s counsel a number of “steps” it had taken or would take “in an effort to preserve shareholder value at 2040, while retaining all rights to pursue any claims Swan may have at law or in equity.” Swan reiterated that, on “August 13, 2024, Tether provided Swan with notice that Tether had appointed [Defendant] Proton Management to manage 2040 Energy’s day-to-day operations. As you know, Proton Management consists entirely of former Swan employees whom Tether conspired to effectively steal Swan’s [B]itcoin mining business.”

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115. On September 13, 2024, Tether’s counsel proposed written resolutions of

the Board of Directors of 2040 Energy related to a Bitcoin wallet contract, nominally asking for Klippsten’s review and approval as a director. Among other things, the resolutions:

• Falsely represented that, on August 19, 2024, Swan “proclaimed” that it had resigned from its responsibilities for “day-to-day operations” over 2040 Energy “notwithstanding the Shareholders Agreement”;
• Represented again that 2040 Energy had appointed Defendant Proton “to provide day-to-day management services for the Company”; and
• Revealed that Zagury is the Chief Executive Officer of Defendant Proton, Defendant Naidoo is the Chief Investment Officer, and Effertz is the Chief Financial Officer.

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116. Swan responded that Klippsten could not sign the resolutions because they were misleading:

Swan’s “August 19th correspondence . . . did not, for example, ‘proclaim’ Swan’s ‘Resignation.’ As [Swan] made clear, Swan is not responsible for managing 2040’s day-to-day operations because, on August 13, 2024 (6 days earlier), Tether appointed Proton Management to manage 2040’s day-to-day operations. That appointment, as you know, was the culmination of Tether’s conspiracy with the former Swan affiliates and employees who formed and now work at Proton Management to steal Swan’s BNOC and bitcoin mining business (among other conduct). Zagury, who is identified as Proton’s CEO in the resolutions, was Swan’s Chief Investment Officer until his abrupt and coordinated resignation from Swan on August 9, 2024, and San Naidoo, who is identified as Proton’s Chief Investment Officer, was Swan’s consultant until his abrupt and coordinated resignation on August 9th.” Again, Swan reserved all rights. (On September 17, 2024, Tether’s counsel informed Swan that the 2040 Energy Board had unilaterally passed the resolutions.)