Harris M. Mufson and Ilissa Stacy Samplin, partners at Gibson, Dunn & Crutcher in the Am Law 10 firm’s New York and Los Angeles offices, respectively, are the lead attorneys for the plaintiff, Electric Solidus Inc., also known as Swan Bitcoin, in its complaint against the defendants, Proton Management Ltd. and six ex-Swan consultants.
“As laid out in Swan’s complaint, the theft of Swan’s trade secrets and confidential information is staggering and alarming,” Mufson said in a statement. “We look forward to fully vindicating our client’s rights.”
Proton did not respond to a request for comment.
Swan, founded in June 2019, helps individuals, businesses, and retail traders purchase, save and invest in bitcoin and related products. Swan also mines bitcoin to further supplement its core business. Swan later created a new institutional division primarily focusing on developing financial services for investors and operators in bitcoin mining.
Bitcoin mining is the process by which transactions are officially entered on the blockchain. It typically requires the spending of significant amounts of computing power and energy, and miners are incentivized to participate with newly minted Bitcoin, which is normally automatically awarded to successful miners. It is also the way new bitcoins are launched into circulation.
Swan alleged in the complaint that six of its former consultants conspired to steal its highly proprietary and confidential bitcoin mining business, technology, trade secrets, property and personnel, and then resigned almost simultaneously on the evening of Aug. 8 to join Proton, which was allegedly created to thrive off of Swan’s confidential information and trade secrets.
Swan says it has the evidence to prove its allegations: it points to proprietary code from Swan’s bitcoin mining monitoring software that was allegedly stolen from its secure systems, as well as thousands of documents and files containing Swan’s proprietary, confidential information and trade secrets and an attempt to cover its tracks, according to the complaint.
“At the same time defendants were stealing the crown jewels from Swan’s Bitcoin mining business, they executed their pre-planned scheme to solicit Swan’s mining personnel; usurp Swan’s funding arrangement; use Swan’s financing partner, cryptocurrency giant Tether, for “legal cover” for their misdeeds; and irreparably harm Swan’s ability to compete in the market,” Swan alleged in the complaint.
Now, the case is pending before the U.S. District Judge Wesley L. Hsu of the Central District of California. The plaintiff alleged seven causes of action, including trade secret misappropriation, breach of contract and aiding and abetting breach of duty of loyalty.
In filing the action on Wednesday evening, Swan alleged that it had been left with no choice, as the defendants have refused to return Swan’s devices and confidential, proprietary and trade secret information.
In addition, the defendants have “continued to use the proprietary data, information, and resources they stole to operate Proton’s Bitcoin mining business and have continued to work with Swan’s business partners and vendors while trading on Swan’s name.”
A representative of the financial services firm, in a written statement to Law.com, added: “Swan filed suit to protect its legal rights, intellectual property, and the Swan brand our customers and investors trust.”