Sphere 3D Faces Legal Escalation as Gryphon Blocks $10M

Sphere 3D Faces Legal Escalation as Gryphon Blocks $10M

Sphere 3D Faces Legal Escalation as Gryphon Blocks $10M

Sphere 3D and Gryphon continue their legal battle, with Gryphon filing a new action to prevent the seizure of $10M from a recent settlement.

On March 25, an additional chapter was added to the ongoing legal struggle between Bitcoin miners Sphere 3D and Gryphon Digital Mining.

Gryphon Files Legal Charge Against Sphere 3D

Additionally, they filed a new legal action to prevent the seizure of $10 million from a recent settlement. Gryphon submitted a pre-motion letter to the United States District Court for the Southern District of New York, where the miner requests permission to file a motion for prejudgment attachment.

Sphere 3D recently obtained $10 million in equity proceeds related to Core Scientific’s bankruptcy exit, which the miner is attempting to secure.

Gryphon wants to ensure access to financial resources to cover any potential judgment against it for Sphere’s alleged breach of contract, which includes damages totaling at least $30 million.

Sphere 3D Faces Legal Escalation as Gryphon Blocks $10M
Gryphon’s letter requesting permission to file a motion. Source: Hogan Lovells/Gryphon.

According to the allegations, Sphere violated the exclusivity condition of its deal with Gryphon by entering into at least four hosting agreements with other providers.

The pre-motion letter conceals the fact that Sphere is in good financial health. According to Gryphon’s letter, which is based on Sphere’s annual report to the Securities and Exchange Commission, the firm has publicly admitted the possibility that it could file for bankruptcy, which suggests that it may not be able to meet any future judgments.

Over the past four months, Sphere has presented evidence of its increasing financial difficulties. The letter states that on November 28, 2023, Sphere’s legal counsel recognized that the company was running with a net loss of $200 million and that recent losses had exceeded revenue by a two-to-one margin.

A filing in the Core Bankruptcy Action confirmed this. As the crypto winter hit miners, Sphere’s most recent earnings report, released on March 13, revealed that the company had incurred a net loss of $23.4 million for 2023.

This figure is significantly higher than the previous year’s loss of $192.8 million. Since August 2021, the companies have been working together as partners, and they have even discussed merging under the Gryphon brand.

Sphere, on the other hand, filed its initial lawsuit against Gryphon in April 2023, following an alleged spoofing assault that resulted in the unauthorized transfer of Bitcoin.

According to the allegations, in January 2023, Gryphon CEO Rob Chang was tricked into delivering 18 bitcoins to a spoofing attacker pretending to be Sphere 3D’s senior finance officer.

Another eight bitcoins were sent to the same address a few days after the initial send. Gryphon argued at the time that Sphere’s “gross negligence” allowed malicious actors to carry out actions on his behalf.

Gryphon has filed claims against Sphere 3D for breach of contract, carelessness, and defamation. These claims are in addition to the fact that Gryphon has dismissed allegations related to the transfer of assets. The partnership finalized its dissolution in October 2023. 

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