Sphere 3D Takes Action Against Gryphon Digital Mining After Bitcoin Theft


Crypto miner Sphere 3D has filed a lawsuit against its partner Gryphon Digital Mining after a purported spoofing attack resulted in an irregular transfer of Bitcoin (BTC), according to court documents from April 7. 

“Today we initiated litigation against Gryphon, the custodial management services provider of our blockchain and cryptocurrency-related services, for materially breaching the Master Services Agreement (“MSA”) we entered into with Gryphon,” said Patricia Trompeter, CEO Sphere 3D in a statement for investors, adding that “Gryphon has placed the Company’s assets in serious jeopardy and deliberately violated their contractual obligations.”

As per the complaint, Gryphon CEO Rob Chang purportedly wired BTC to a fraudster masquerading as Sphere 3D’s chief financial officer via a spoofing attack on January 18. Another eight Bitcoin were sent to the same address a few days later.

In a spoofing attack, an attacker attempts to deceive a system or a user into believing that 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 attacks.

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

“While we cannot comment on pending litigation, we are confident that our approaching response to the complaint – and the documents and other evidence that will come to light in the aftermath – will speak for themselves.”

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

Sphere’s statement also implies that the relationship between the companies that were once contemplating a merger has gone downhill. Trompeter noted that the filing demonstrates that “we will not be intimidated 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 contacted Sphere 3D, but did not receive an immediate response. Both companies claim to be dedicated to growing crypto mining operations with a net carbon-neutral impact. A merger agreement between the two companies was terminated in April 2022. 

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