Swan, a firm focused on offering Bitcoin financial products, is abandoning mining, shelving its planned initial public offering (IPO), and laying off employees, according to a post on X (formerly Twitter) by the firm’s CEO Cory Klippsten. 

Swan’s managed mining business targeted large institutional investors with the opportunity to partner with it and invest in mining facilities. The initial announcement of this product noted that Tether had “already dedicated substantial capital to establishing a major presence in bitcoin mining, much of it through Swan.”

In a statement to Protos, Tether said, “Tether’s hosted contracts with Swan’s mining entity are unaffected and we do not expect any interruptions. The team running such operations is segregated and will continue operating normally.”

Apparently, despite the partnership with Tether, the unit has failed to deliver on Swan’s “expectation of significant near-term revenue.” This apparently led to the decision to delay an apparently planned IPO.

The post also notes that Swan has had to perform a ‘staff reduction’ this week, though numbers were not provided. At least one employee in an education role, Stephen Livera, took to X to state that his position had been eliminated.

Read more: Swan Bitcoin’s custodian now owned by Ripple — but execs have major beef

Despite Swan seeming to have some issues, Klippsten still claims to believe “this is an incredible moment in time for Bitcoin.”

Klippsten had previously criticized Celsius, one of Swan’s competitors, claiming that “the Celsius ‘mining IPO’ was always just marketing puffery.” Now he tells his followers that he will “see you on the battlefield. #TeamBitcoin.” 

Protos has reached out to Swan to determine how ending the managed mining program will affect partners, and how many employees were laid off, and it directed us to Klippsten’s post on X.

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Swan Bitcoin recently announced numerous new lines of business, including bitcoin-backed lending, venture and private equity investments, and incredibly, a trading fund. Indeed, despite repeated warnings against active trading and an unwavering buy-and-hold message regarding bitcoin, Swan has hired a quant trader to actively trade the currency.

Fortune Crypto wrote that Swan “deployed” $200 million worth of capital in 2023. In that piece, Fortune publicized Swan’s “$40 million in funding raised in 2023 for expansion efforts.” However, it was initially difficult to determine exactly how much equity Swan sold to raise that capital.

In an email to Protos, Klippsten further explained, “$16.5 million was in our Series B round, which priced in November 2022 and closed in early 2023. We’ve taken about $25 million so far on a $30 million convertible note leading into our Series C.”

Swan disclosed $50 million allocated to its new trading fund, Timechain Alpha, whose raise has closed. Swan’s Institutional webpage doesn’t name the source or denomination of those funds.

Klippsten promised more details on the terms and participants of that round within a few months, however, since then, Swan has repeatedly declined to name the primary source of its 2023 fundraising efforts.

On an episode of Laura Shin’s Unchained podcast, Klippsten further explained Timechain Alpha. Its newly-hired trader, who previously worked at Cumberland and Tower Research, now trades for Swan using “all code and signals and uses AI and market micro-structures to determine whether he has enough time window to get in and out of his positions and all this kind of stuff, so he’s very sophisticated.”

Read more: Swan Bitcoin’s custodian now owned by Ripple — but execs have major beef

Matt Odell guesses the name of Swan’s biggest investor

One of the earliest organizers of Bitcoin Magazine’s annual conferences, Matt Odell, is a managing partner at bitcoin-focused investment fund, Ten31.

Swan says it deployed $150 million in 2023 yet, according to Odell, “nobody knows anywhere where that money went.”

Of course, Odell does not admit that Swan could have deployed that capital on new lines of business or other places outside the visibility of Ten31’s deal flow monitoring. He does, however, contrast this alleged opacity with Ten31, which deployed approximately $100 million into 36 companies from 2021 through 2023 and publicly disclosed its investments.

Odell suspects Swan’s revenue numbers are exaggerated, although he doesn’t consider business operations that aren’t publicly advertised. Indeed, it’s highly unlikely that Swan’s 0.99% commission on bitcoin purchases alone would account for its $125 million in annualized revenue.

In a moment of pure speculation with co-host Marty Bent, Odell supposed that money connected to Tether might be supporting Swan. Odell guessed, “The only thing that could kind of even come close to making sense is if it’s Bitfinex/Tether money.” Odell admitted that he didn’t have evidence of Tether’s involvement.

Klippsten responds to Odell

Klippsten disputes these claims and believes that Odell holds inaccurate beliefs about Swan. The Swan CEO notes that Odell was an early advisor yet does not have privileged information rights nowadays.

In an email to Protos, Klippsten explained, “We have hundreds of investors historically, and a planned $150M Series C raise underway. We are extremely selective about disclosing our capital partnerships, whether for Swan directly or for our financing of deals through Swan Institutional, because whenever capital providers become public knowledge they get inundated with funding inquiries from companies and venture funds.”

He also responded to Odell’s criticism of Timechain Alpha. “We needed a head of trading for institutional clients to execute trades… from multiple OTC desks. He happened to have a great track record of asset management, and a strong desire to continue managing money… The fund is already at capacity and we are not marketing it.” Swan’s December 7, 2023 press release claims that Timechain Alpha launched fully subscribed.

Withdrawal requests honored

Swan’s first custodian of record, Prime Trust, collapsed into bankruptcy in August 2023. The founder of that company, Scott Purcell, resigned from Prime Trust and started a similar company, Fortress Trust.

Read more: Former Binance US custodian Prime Trust joins crypto’s chapter 11 club

Despite these custodians’ troubles, Swan has fulfilled customer withdrawal requests. Indeed, the vast majority of customers have already withdrawn their bitcoin into self-custody. 

Klippsten told Protos, “Every single withdrawal request has been processed unless it was involved in suspected fraud or a criminal case. Swan has never lost a cent, and never lost a sat.”

He added, “Our goal is zero BTC under custody for non-regulated segments and we’re proud that 83% of all bitcoin purchased through Swan historically has been withdrawn. We don’t charge for custody because we don’t want to create the incentive to accumulate custodied coins, and we have free withdrawals for our users for the same reason.”

Of the bitcoin that Swan reluctantly custodies — again, despite an 83% withdrawal rate and repeated calls for customers to withdraw into self-custody — the company currently stores most at insured, multi-signature, cold storage wallets in BitGo’s custody.

Swan also says it holds a few coins in hot wallets or Fireblocks wallets controlled by Fortress and Bakkt to satisfy regular, day-to-day customer purchases and withdrawals.

Other Swan criticisms and responses

Protos has previously covered Ripple’s eyebrow-raising bid to acquire Swan’s primary custodian of record, Fortress Trust — surprising given how often Klippsten had accused Ripple executives of criminal activity. Ripple’s deal to acquire Fortress Trust ultimately fell through.

The previous year, Klippsten publicly discussed the use of mortgages in wealth planning for Bitcoin investment. Naturally, Bitcoiners quickly attacked what appeared to be an endorsement of leverage.

Klippsten clarified to Protos, “We announced a year ago that we were working on a Swan Home Equity product and we continue to look for the right path to bring it to market. People already use HELOCs to diversify their holdings into bitcoin.

“We’re hoping to let people accomplish that with a single transaction, with extremely conservative LTV limits, and no out-of-pocket costs on origination. It’s not controversial at all with anyone who has actually taken a few minutes to understand the product, and there is a ton of demand for it.”

Not only this, Swan drew considerable criticism for advising users not to withdraw directly into mixing services. Samourai Wallet described that move as “preemptively” complying with sanctions while Bitcoin Takeover podcast host Vlad Costea described the move as “dystopian.” In response, Swan CTO Yan Pritzker defended his company’s position on mixing services in a lengthy tweet.

Swan has also consistently criticized misbehavior in the crypto industry, including FTX, Celsius, Voyager, BlockFi, Terra LUNA, and many other failed projects. Its media division and all of its company spokespeople consistently focus on Bitcoin and disavow altcoins entirely.

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Edit 21:30 UTC, Jan 12: Corrected the amount of Swan’s Series C convertible note. Corrected references to Timechain Alpha’s location. Corrected Matt Odell’s role as an early advisor, not investor, in Swan.

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Since 2022, Swan Bitcoin CEO Cory Klippsten has been alleging criminal conduct by Ripple executives. Last week, Ripple announced its acquisition of Swan Bitcoin’s major custodian, Fortress Trust.

Whoops.

A few months ago, Swan Bitcoin transitioned from Prime Trust to Fortress Trust and BitGo. Prime Trust is in bankruptcy proceedings. Fortress Trust also allegedly lost funds from its hot wallets in another security incident. Ripple is allegedly making harmed Fortress customers whole as part of its acquisition.

Swan Bitcoin claims that although Fortress lost funds in a security incident, that incident did not involve Swan Bitcoin’s customers. It claims, “Swan client coins are in insured cold wallets at BitGo and did not move during the reported incident at Fortress. The coins are protected by video calls and physical access, and are not subject to any incidents at Fortress.”

Moreover, Klippsten claims that Lloyd’s of London underwrote insurance of up to $250 million per bitcoin wallet for some of Swan Bitcoin’s customers, with no wallet holding more than $250 million.

In any case, Ripple is acquiring Fortress Trust. Suddenly, Klippsten has new, wealthier, and more powerful higher-ups — that he has repeatedly claimed are criminals.

Klippsten claimed his suitors committed financial crimes

• On March 29, 2022, Klippsten alleged, “Chris Larsen from Ripple is a scam artist. He lies about Bitcoin, professionally, to enrich himself.”
• That same day, Klippsten wrote, “Chris Larsen is one of the worst actors in the entire crypto space, who’s made a living from lies, misinformation, and securities fraud.”
• On November 8, 2022, Klippsten concluded, “Ripple is a scam.”
• On December 7, 2022, Klippsten tweeted, “Here’s hoping Larsen shares a cell with SBF.”
• On December 18, 2022, Klippsten called Larsen a “criminal scam artist.”
• On March 24 of this year, Klippsten alleged that Chris Larsen has “been pumping and dumping XRP unregistered securities on unsuspecting retail for the last decade.”
• On March 25, 2023, Klippsten alleged that “Chris Larsen and the other owners of Ripple/XRP” were perpetrating “a criminal game of securities fraud.”

In an ultimate twist of irony, Ripple announced it was acquiring the primary custodian of Klippsten’s Swan Bitcoin, Fortress Trust, on September 8, 2023.

Swan CEO made repeated claims of Ripple’s criminal conduct

Swan Bitcoin CEO Cory Klippsten has a history of criticizing Ripple, often to the annoyance of the “XRP Army.” In addition to claims about civil misconduct, he also made claims about criminal acts.

Klippsten has claimed Larsen, a billionaire co-founder of Ripple, has acted as a “criminal scam artist,” made a living from professional lies, committed securities fraud, and pump-and-dumped unregistered securities onto retail victims.

He noted that Larsen contributed up to $5 million for Greenpeace’s anti-Bitcoin mining ad campaign against Bitcoin. Klippsten also retweeted a post by Coin Center’s Neeraj Agrawal, who accused Larsen of preferring “a world where CEOs can centrally control the future of a cryptocurrency network.”

Klippsten has called Chris Larsen “anti-human.” He repeated that sentiment by calling Greenpeace “anti-Bitcoin, anti-freedom, anti-human” over its opposition to Bitcoin, emphasizing that Larsen was funding its anti-Bitcoin advertisements.

Although the Securities and Exchange Commission (SEC) has not filed (and as a civil enforcement agency, never will file) a criminal lawsuit against Ripple, commissioners’ civil lawsuit against Ripple is well into its second year. Commissioners alleged that Ripple, including Larsen, raised $1.3 billion in unregistered securities sales. Commissioners are also appealing a court ruling that handed Ripple a partial victory.

Read more: SEC wants 2nd Circuit to overrule Ripple XRP decision

Klippsten can be snarky at times. He teased XRP holders by suggesting selling XRP to buy bitcoin on Swan Bitcoin. And finally, in case Klippsten wasn’t perfectly clear, he believes the current suitor of his company’s primary custodian is an outright scam.

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Protos recently interviewed Cory Klippsten, CEO at Swan Bitcoin and Partner at Bitcoiner Ventures, to kick off a new series of opinions from big names in crypto. Klippsten has been vocal on social media about his views on cryptocurrencies — previously a fan of alt-coins, he’s taken a staunch Bitcoin-only approach.

Here’s his take on the current market, Ethereum’s Merge, regulation, and more.

Protos: You’ve gained 150,000 followers on Twitter since last year. What are you trying to accomplish by being out in the media? What’s your overall goal?

Klippsten: It’s not necessarily a goal. It’s something that fell into our lap over the past few months because of the calls that I made on Terra LUNA and then Celsius. So LUNA in March and then Celsius in May brought a lot of media attention. I think it’s very much driven by this recent news cycle with the CeFi [centralized finance] lending implosion of the past three months.

When I’m out there talking to media, honestly, I think the number one message that I try to get across is that Bitcoin is not part of the crypto industry. There’s Bitcoin, and there’s other things that call themselves crypto.

It’s in the interest of crypto people to try to put Bitcoin under that umbrella. And it’s clearly in the interests of Bitcoiners in Bitcoin companies to separate Bitcoin from crypto. So that’s the message that I try to convey very clearly with every one of these outlets.

The difference between Bitcoin and other crypto assets is something that crypto publications understand, but the mainstream press? They’re blown away — they thought all crypto people are basically crypto bros trying to grift.

Protos: So what is exactly the difference? Because a lot of people are still confused. They call Bitcoin a Ponzi scheme because the price only goes up if more people buy. How is Bitcoin different?

Klippsten: Well, the price goes up with more money flows into the protocol. It’s a monetary protocol. So if you can get the same people to buy more, that works well. But in general, you’ve got a fixed supply of Bitcoin at only 21 million coins. So obviously, if more people buy and hold it and demand goes up against fixed supply, then you can shift up the demand curve.

However, it doesn’t fit the definition of a Ponzi scheme. Lyn Alden has done the best job of kind of laying out exactly what the definition of a Ponzi scheme is and why Bitcoin doesn’t meet that definition in multiple ways.

Why is Bitcoin not a Ponzi scheme? The big difference is that there is no entity or group of people that control Bitcoin who are marketing Bitcoin to be able to dump it. If anything, most Bitcoiners that promote Bitcoin are just buying and holding as much as possible — and people who love it the most are the people who never sell.

It’s kind of the exact opposite of what you see with the like of Andreessen Horowitz: full frontal assault, marketing through all their channels, executing massive pumps after they bought a bunch of cheap Solana from the centralized team that controls it in the spring of 2021.

They ⏤ and all their VC friends ⏤ were selling the top in late 2021, while claiming to the world that they were HODLing. So that’s very different from something like Celsius, which obviously blew up, and you’ve got their whole management team with this centralized company.

“Cryptocurrency” in air quotes is really just company scrip. They were telling everybody to hold and telling people they never sell. And then, of course, selling tens of millions of dollars of their coins.

Protos: The number of these scams seems to continue proliferating. How would you suggest the world solve this problem?

Klippsten: I think awareness is the key. I think people need to realize there’s no such thing as a free lunch. Unfortunately, some people get burned during each one of these cycles.

Promising free money and a free lunch? It always implodes. A bunch of people get burned. This educates not just them, but also concentric circles around them ⏤ when people watch from afar so that they won’t fall for these things in the future. As a whole, the population gets slightly smarter each time. As far as regulation, I’m not pro-regulation. I’m anti-hypocrisy.

My stand on these non-bitcoin cryptos that all pass the Howey test (meaning they qualify to be regulated as securities under US law) is that basically you have to be banging the drum of deregulation. Ponzi schemes, penny stock scams, OTCs, pinksheet stock manipulation, all that kind of stuff. You need to deregulate all of that and get rid of all those rules, or you need to apply the exact same set of rules to crypto.

So, I just don’t think you can have it both ways. Probably the right thing is just to see the rules applied evenly across the board. Not just that these crypto scammers get away with things that traditional finance is not allowed to get away with. Like, you can’t send stock mailers to nursing homes; you can’t market Ponzi schemes to your grandma.

If the laws had actually been applied all along, there would be none of this nonsense in crypto that all have centralized governance. Almost none of these projects had a fair launch and decentralized their teams. With no central entity, it’s a tiny group of basically just proof-of-work coins.

Protos: That brings up a good question about Ethereum’s proof-of-stake transition and the Merge narrative. Do you have any views on the transition to ETH2 and its securities designation?

Klippsten: Yeah, I don’t know. We’ll see if they have to battle it out — there’s some degree of uncertainty there. You know, there’s certainly an argument to be made that staking is essentially an investment contract, because you’re getting interest or yield. Right? You’re investing money and then you’re getting paid out.

I don’t know, though. I don’t really care that much. I think in the medium to long run, proof-of-stake is centralizing over time. So I think anything that chooses proof-of-stake will just end up in a kind of race to the bottom for transaction speed, centralization, control, and manipulation. Essentially you end up at AWS in the end. No matter what you do, however long it takes to play out, any proof-of-stake crypto is doomed in the long run.

Protos: Can you explain to someone who doesn’t understand all of these different proofs? Why is proof-of-work important in your opinion?

Klippsten: If you don’t have a tie-in to the real economy that guarantees security, then you’re going to end up with the political process. You’re going to end up with governance. You’re gonna end up with humans arguing over things to govern the network, because there’s nothing from the real world that requires work to govern a proof-of-stake network. It’s only money and politics.

The game theory of how proof-of-work operates and how it ties expenditure of energy in the real world to Bitcoin ⏤ that Bitcoin’s network actually pays you to create, to generate, and to expend the energy ⏤ makes all the difference.

We’ve had proof-of-stake in various flavors for hundreds years. It’s essentially the fiat system with centralized elites making decisions about monetary supply. Who gets to decide what we can and can’t use energy for? It’s a march toward totalitarianism and authoritarianism.

Protos: What does decentralization mean to you?

Klippsten: Well, a truly decentralized system means that nobody actually controls it, can change it, or turn it off. Right now, that’s only Bitcoin, and the whole decentralization thing is otherwise marketing buzz. For pretty much everything else where they can shut down the blockchain and restart it and coordinate with the devs… that’s what you see over and over again with Ethereum every two months requiring every fully validating node to upgrade.

You see Solana shutting down and coordinating in invite-only channels with all the block producers to restart the network every couple of weeks and things like that. Those are not decentralized networks the way that Bitcoin is decentralized, or the way that the internet itself is.

Protos: What are your thoughts on stablecoins?

Klippsten: Well, there are two different stablecoins: collateralized and uncollateralized. You can’t have a decentralized, algorithmic stablecoin maintain a peg. You need to have a centralized team conducting market operations, else you will just not be able to maintain the peg in times of stress.

This is something the Basis team discovered in 2018 ⏤ and they were way smarter than Do Kwon or anybody else like at Tron or whatever working on stablecoins today. Basis realized that this stablecoin thing couldn’t be anything other than a security. So they decided to refund the investors’ money.

If your claim is a $1 peg, regulators are probably going to consider that a digital dollar, and they’re going to regulate it. I think that’s probably what’s going to happen. That would mean that any exchange is probably going to opt for something that is approved by the government, essentially. I think that’s kind of where we’re headed.

Protos: Any final thoughts?

Klippsten: If there’s anything anyone isn’t clear on, grab me on Twitter or on Swan’s website. We have Swan Private Client, Advisor, and an IRA business. We also created Bitcoiner Jobs, the biggest Bitcoin jobs board. I’m a partner at Bitcoiner Ventures to fund startup entrepreneurs. We host the Pacific Bitcoin Conference, the largest Bitcoin conference on the West Coast.

This interview has been edited for clarity — all views expressed belong to Klippsten. For more, follow us on Twitter and Google News or listen to our investigative podcast Innovated: Blockchain City.

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