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

An allegedly Bitcoin spoofing attack is behind the lawsuit between the companies that at one time considered merging.

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

“Today we filed 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 put the Company’s assets at significant risk and willfully violated their contractual duties.”

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

In a spoofing attack, an attacker attempts to trick a system or a user into believing that they are someone else through 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 impending 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 been partners since August 2021. Gryphon is in charge of 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 suggests that the relationship between the companies that were once considering a merger has deteriorated. Trompeter noted that the filing demonstrates 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 receive an immediate response. Both companies claim to be committed 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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