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Swan Bitcoin, a financial services firm focused on Bitcoin, has filed a legal malpractice suit against its retained law firm, Gibson, Dunn & Crutcher, in California’s Superior Court. The lawsuit, submitted on November 22, accuses Gibson of prioritizing top stablecoin issuer Tether over its existing client relationship with Swan.
The conflict surfaced after Gibson hired attorney Barry Berke, who represents Tether. Swan alleges that Gibson’s actions violated attorney-client ethics by attempting to sever ties under the pretext of a conflict of interest. According to Swan’s filing, Gibson “wooed and won Swan” to represent it in a legal battle against former employees, only to later pivot to embracing Tether as a client.
The tension stems from an ongoing lawsuit Swan filed in September against ex-employees accused of misappropriating proprietary software code to establish a competing firm, Proton Management. Swan claims Proton persuaded Tether to terminate its partnership with Swan and instead align with Proton. Tether, however, is not named as a defendant in that lawsuit.
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Swan Pushes Back on Withdrawal
As the controversy escalated, Gibson formally moved to withdraw as Swan’s counsel in its lawsuit against Proton, citing a “complete breakdown of the attorney-client relationship.” Gibson also claimed Swan refused to pay outstanding legal fees and demanded millions of dollars in compensation for not opposing the withdrawal request.
Swan responded on November 25 by seeking a temporary restraining order to prevent Gibson from stepping away from its legal case against Proton and from onboarding Tether as a client. Swan further argues that Gibson’s actions are a blatant violation of the “Hot Potato” Rule in legal ethics, which prohibits attorneys from dropping clients to avoid conflicts of interest.
Implications for Crypto Legal Representation
The restraining order hearing is set for November 26, with Swan demanding accountability for what it deems a betrayal by its legal representation. As a result, Swan’s CEO, Cory Klippsten, has criticized Gibson’s handling of the situation, framing it as a cautionary tale of loyalty sacrificed for financial incentives.
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As the court deliberates, the case could set a precedent for how law firms manage overlapping client relationships in the competitive crypto industry.
