Bitcoin Mining Firm Sphere 3D Sues Gryphon Digital Mining after Spoofing Attack

News | April 10, 2023 By:

On Friday, April 7, 2023, carbon-neutral bitcoin mining company Sphere 3D filed a lawsuit against its business partner Gryphon Digital Mining for losing $500,000 worth of bitcoin due to a spoofing attack.

On August 19, 2021, the two companies entered into the Master Services Agreement (MSA), allowing Gryphon to manage Sphere 3D’s crypto mining activities and maintain fiduciary duties of Sphere’s digital assets. As part of the agreement, Gryphon receives 22.5% percent of Sphere 3D’s gross profit.

The lawsuit, filed with the Southern District of New York, accused Gryphon CEO Rob Chang of sending 18 BTC in January to an address belonging to a fraudster posing as Sphere 3D’s chief financial officer. The complaint also claims that an additional eight BTC were sent to the same address a few days later.

“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,” Sphere 3D CEO Patricia Trompeter said in a press release. “We believe that Gryphon has put the Company’s assets at significant risk and willfully violated their contractual duties.”

Additionally, Sphere 3D alleged that Gryphon provided poor services to its partner and misrepresented Sphere 3D’s computing power as its own in public disclosures. Sphere 3D is seeking damages “over $75,000, exclusive of interest and costs.”

“My job, first and foremost, is to safeguard the assets of the Company and maximize shareholder value. Today’s filing demonstrates that we will not only protect the Company that we all have worked so hard to navigate through the past year, but also that we will not be bullied or threatened by the likes of Gryphon. Corporate integrity is essential, including in our industry,” Trompeter said. “Gryphon has failed to act with integrity, has failed to honor our contract, and we will hold them accountable.”