Swan Bitcoin Lawsuit Paused as Court Grants Stay in Trade Secret Dispute
On Tuesday, May 27, 2025, the United States District Court for the Central District of California granted a stay in the ongoing case of Elec. Solidus, Inc. v. Proton Management Ltd. The ruling comes in response to a request from the Individual Defendants, which include several former consultants of Electric Solidus Inc., also known as Swan Bitcoin.
The Court’s decision follows an ex parte application by the Individual Defendants to stay proceedings while they appeal a previous order that had largely denied their motion to compel arbitration. The appeal is currently pending before the Ninth Circuit. The Court found it appropriate to grant the stay under the precedent set by the Supreme Court in Coinbase, Inc. v. Bielski, which stipulates that a district court must pause its proceedings when an interlocutory appeal regarding arbitration is underway.
In the order issued by Judge Michelle Williams Court, the Court also stated that it would stay the case against Proton sua sponte, indicating the Court’s authority to impose such a stay independently of a formal request. The stay affects all proceedings related to Proton while the appeal is ongoing.
The case stems from allegations that Proton Management and the Individual Defendants conspired to steal Electric Solidus’s Bitcoin mining business. Swan Bitcoin filed its original complaint on September 25, 2024, alongside a request for a temporary restraining order (TRO) to prevent the defendants from using any proprietary information or trade secrets belonging to Swan.
Swan’s initial request for relief was denied on October 4, 2024. However, the Court established a briefing schedule for a preliminary injunction, which Swan later withdrew without prejudice. The plaintiffs allege that Proton and the Individual Defendants misused Swan’s proprietary information and trade secrets to further their own Bitcoin mining operations beyond the scope of their stated intentions.
In a first amended complaint filed on January 27, 2025, Swan outlined several causes of action, including trade secret misappropriation under the Defend Trade Secrets Act, breach of contract, tortious interference, and civil conspiracy, among others. The plaintiffs argue that they have suffered irreparable harm due to the defendants’ alleged misconduct.
Following Swan’s motions for discovery, the Court had previously granted requests for initial disclosures from the defendants. In late February 2025, the Individual Defendants filed motions to compel arbitration and to dismiss the case, while Proton filed a motion to dismiss for lack of personal jurisdiction.
On March 28, 2025, the Court issued a ruling that granted the Individual Defendants’ motion to compel arbitration concerning the conversion claim but denied it for other claims based on the assertion that those claims did not raise issues of arbitrability. The Court also denied Proton’s motions to dismiss.
Despite Swan’s objections, the Individual Defendants filed a notice of automatic stay on May 2, 2025, citing the Coinbase ruling. This prompted further discussions regarding the applicability of the stay to ongoing discovery proceedings.
On May 7, 2025, Judge Charles F. Eick ordered the defendants to respond to Swan’s document requests, with the stipulation that they retain the right to seek a stay of discovery from the District Judge. The Ninth Circuit has set deadlines for the appeal, with the opening brief due by June 18, 2025.
The Court’s decision to grant the stay highlights the intersection of arbitration law and the need to preserve the rights of defendants while litigation proceeds. The proceedings will remain on hold until the Ninth Circuit resolves the appeal, which could significantly influence the case’s trajectory.
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