Tether, the company behind the stablecoin USDT, has failed to get a court order to stop its former bitcoin mining partner, Swan Bitcoin, from getting a lawsuit in California.
On Wednesday, the UK High Court dismissed Tether’s request for an injunction, adding another twist to the deteriorating relationship between the two firms.
The legal dispute stems from a collapsed mining venture that once aimed to expand cryptocurrency infrastructure but has since devolved into a courtroom battle over alleged contract breaches and misuse of proprietary information.
Tether reportedly formed a joint mining venture called 2040 Energy with Swan Bitcoin in June 2023. The venture sought to establish mining operations in Tasmania, Norway, and Texas.
Court filings reveal that Tether held an 80 per cent stake in the company. Swan owned the remaining 20 per cent. Financial struggles and valuation disputes ultimately broke down their relationship.
Tether accused Swan of seeking outside funding from Ripple without its consent after refusing to inject capital into the project. By August, the CEO of 2040 Energy, along with several Swan employees and consultants, resigned. This further deepened the rift between the companies.
In its UK filing, Tether claimed that Swan Bitcoin could access sensitive business information through the California lawsuit and use it for a competitive advantage. The company sought an injunction to stop Swan from continuing the case against six former employees. They did this out of the fear that disclosures could expose proprietary details about its operations.
However, Judge Bright dismissed Tether’s concerns, ruling that Swan was unlikely to exploit any information gained from the proceedings.
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Tether is no stranger to legal hot water
Tether sued Swan Bitcoin in January, alleging contract breaches, while Swan launched its own legal challenge in the United States. Swan accused former employees of a scheme to steal trade secrets and shift business operations to a rival firm.
Although the lawsuit does not name Tether as a defendant, court filings claim the company “allegedly conspired” with Swan’s former consultants to support the new firm. Furthermore, as both lawsuits advance in different jurisdictions, the conflict between Tether and Swan Bitcoin remains unresolved.
Over the past five years, Tether has faced multiple controversies and legal challenges that have impacted its operations and reputation.
In 2019, the New York Attorney General investigated Tether’s parent company, iFinex Inc., for allegedly covering up an $850 million loss. Tether and Bitfinex later paid an USD$18.5 million fine and agreed to stop doing business with New York residents. Regulators also required them to provide quarterly reports on their reserves to improve transparency.
Tether has repeatedly faced criticism over the transparency of its reserves. Many doubt whether each USDT token is truly backed by equivalent assets. Despite releasing periodic attestations, the company has not undergone a full independent audit. This lack of verification fuels skepticism within the financial community.
Analysts have accused Tether of manipulating the market by issuing unbacked USDT to inflate cryptocurrency prices. These claims have sparked debate, but conclusive evidence remains elusive. Tether continues to deny any wrongdoing.
Criminals and sanctioned entities have increasingly used USDT for illicit activities like money laundering. Its liquidity and relative anonymity make it attractive to those bypassing financial restrictions. Law enforcement agencies in the U.S. and Europe have intensified scrutiny of its role in these transactions.
