Bitcomin mining lawsuit illuminates soured Swan and Tether deal
Add Axios as your preferred source to
see more of our stories on Google.
Workers installing bitcoin mining machines. Photo: Mark Felix/Getty
Swan Bitcoin is suing a group of former contractors over an alleged scheme to seize part of its business, in a suit that heavily implicates one of the most profitable and controversial companies in the industry: stablecoin issuer Tether.
Why it matters: The allegations in the suit shine a light on Tether's efforts in the venture investing space, as it attempts to diversify using its unbelievable windfall borne of its market dominance and an era of high interest rates.
Catch up quick: Swan, a financial services company focused on the world's oldest digital asset, decided last year to get into the bitcoin mining business, which consists of using massive amounts of computing power to verify blockchain transactions in return for bitcoin rewards.
- Tether, according to the complaint, helped it to finance a deal where it would acquire a site and mining equipment and Swan would bring on staff to run it. The deal was struck in July 2023, according to the suit, though Tether and Swan didn't announce the partnership until May 2024.
In August 2024, numerous Swan employees working on the mining unit resigned basically at once.
- Four days later, the suit alleges, Tether terminated its partnership with Swan in favor of a new company, called Proton, which was formed of those departing employees.
Swan is accusing those ex-employees of a scheme, aided by Tether, to take the business out from under it, and stealing intellectual property assets along the way.
- Neither Tether or Swan have replied to requests for comment from Axios.
Tether has made enormous profits off its tens of billions of dollars worth of U.S. dollar deposits thanks to high interest rates. It announced $5.2 billion in profits for the first half of 2024.
- Its stablecoin, tether (USDT), has a market cap of $119 billion, implying that same amount in cash and cash-like instruments on deposit with the firm. Much of it is in short-term U.S. Treasuries, which have been earning interest of around 5%.
- It has since been investing to expand its operations beyond stablecoins.
- Its Tether Power division, for instance, focuses on Bitcoin mining.
Between the lines: Ownership of the mining machines — the most important physical asset for a bitcoin miner — are not at issue in the Swan lawsuit.
- Swan was brought in to manage Tether's machines, so all Swan could claim to own were tools designed for managing machines in its care.
💠Our thought bubble: Something might have happened to sour Tether on the home office of Swan.
- Swan has been plagued by setbacks of late. In September 2023, an associated custodian had a $15 million breach. This July, Swan announced canceling an IPO, layoffs, and the shuttering of its managed bitcoin mining unit.
The intrigue: The lawsuit, first reported by Blockspace Media, mentions in a couple of places that Tether might have already been preparing a lawsuit against Swan over the mining deal.
- In July 2024, a month before the resignations, it alleges that one of the defendants began telling fellow mining employees that Tether would sue Swan over breaches of terms.
- It also details some testy exchanges between Tether counsel and Swan, though many of these are redacted.
What we're watching: Whether or not Swan sues Tether or Tether sues Swan.
- Though the most likely outcome is some sort of out of court settlement.
