The ongoing legal feud between Bitcoin miners Sphere 3D and Gryphon Digital Mining has taken a new turn as Gryphon seeks to prevent Sphere from accessing $10 million from a recent settlement. Filed in the United States District Court for the Southern District of New York, Gryphon’s pre-motion letter aims to secure $10 million in equity proceeds Sphere received from a settlement linked to Core Scientific’s bankruptcy exit. Gryphon’s motive behind this move is to safeguard these funds to cover potential damages resulting from Sphere’s alleged breach of contract, amounting to at least $30 million. Sphere is accused of violating their exclusivity agreement with Gryphon by engaging in hosting agreements with other providers.
Financial Concerns Underpin Legal Maneuvering by Sphere 3D
Gryphon’s pre-motion letter sheds light on Sphere’s precarious financial situation, as outlined in its annual report to the U.S. Securities and Exchange Commission. The report suggests Sphere’s vulnerability to bankruptcy, casting doubt on its ability to meet future legal obligations. Sphere’s recent financial disclosures reveal significant losses, with a net loss of $23.4 million in 2023, exacerbated by the crypto market downturn.
The partnership between Sphere and Gryphon, which began in August 2021, soured following alleged fraudulent activities. Sphere initiated legal action against Gryphon after a purported spoofing attack led to the unauthorized transfer of Bitcoin. Gryphon CEO Rob Chang fell victim to a scam, resulting in the transfer of 18 Bitcoin to a fraudulent entity posing as Sphere’s CFO. Gryphon subsequently terminated the partnership in October 2023, citing breach of contract, negligence, and defamation by Sphere.
Despite attempts to reach out to Sphere 3D for comment, there has been no immediate response. As legal tensions escalate, the outcome of this dispute remains uncertain, with financial stakes and reputations on the line.
