Sphere 3D files lawsuit against Gryphon Digital Mining after BTC transfer

Crypto miner Sphere 3D has filed a lawsuit against its partner Gryphon Digital Mining after an alleged counterfeiting attack led to the irregular transfer of Bitcoin (BTC), according to court documents on April 7.

“Today we filed a lawsuit against Gryphon, the custodial provider for our blockchain and cryptocurrency-related services, for material breach of the Master Services Agreement (“MSA”) we entered into with Gryphon,” said Patricia Trompeter, CEO Sphere 3D in a statement to investors, adding that “Gryphon has placed the Company’s assets at significant risk and willfully breached its contractual obligations.”

According to the complaint, on January 18, Gryphon CEO Rob Chang allegedly linked BTC to a fraudster posing as Sphere 3D’s CFO through a spoofing attack. Another eight Bitcoins were sent to the same address a few days later.

In a spoofing attack, an attacker attempts to trick a system or user into thinking they are someone else by falsifying data such as IP addresses, email headers, or user credentials to gain access to a system, steal sensitive information, or launch further attack.

In comments to Cointelegraph, Gryphon’s Chang said the company is “aware of the complaint and looks forward to vigorously defending it.” He also noted:

“While we cannot comment on pending litigation, we are confident that our forthcoming response to the complaint — and the documents and other evidence that will emerge afterward — will speak for itself.”

Sphere 3D and Gryphon have been partners since August 2021. Gryphon is responsible for managing Sphere 3D’s “crypto mining activities” and maintaining “fiduciary obligations to Sphere’s digital assets,” the statement said. As payment for this work, Gryphon receives 22.5% of Sphere’s gross profit.

Sphere’s statement also suggests that relations between the companies that once considered a merger have deteriorated. Trompeter noted that the filing shows that “we will not be bullied or threatened by the likes of Gryphon.” The executive stated:

“Gryphon has failed to act with integrity, has failed to honor our contract, and we will hold them accountable.”

Cointelegraph reached out to Sphere 3D, but did not immediately receive a response. Both companies claim to be committed to increasing crypto mining with a net carbon neutral impact. A merger agreement between the two companies was terminated in April 2022.

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