Sphere 3D, a company engaged in Bitcoin mining, announced it filed litigation to sue its business partner Gryphon Digital Mining, alleging it lost $500,000 worth of Bitcoin due to a spoofing attack.
The lawsuit specifically accuses Gryphon CEO Rob Chang of transferring 18 Bitcoin to a scammer who posed as Sphere 3D’s CFO in January. Sphere 3D also claims that an additional eight Bitcoin was lost in a similar manner just a few days later.
Addtionally, Sphere 3D alleged that Gryphon provided poor services to its partner and misrepresented the Bitcoin miner’s computing power in public disclosures.
Patricia Trompeter, CEO Sphere 3D said, “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,”
“We believe that Gryphon has put the Company’s assets at significant risk and willfully violated their contractual duties.”
In August 19, 2021, Sphere 3D signed a Master Services Agreement (MSA) with Gryphon, which was later amended on December 29, 2021.
According to the MSA, Gryphon is responsible for overseeing Sphere 3D’s cryptocurrency mining operations and ensuring the protection of Sphere’s digital assets. In exchange for these services, Gryphon is entitled to receive 22.5% of Sphere 3D’s gross profits.
Spoofing Attacks – Bitcoin Theft
Spoofing attacks have become the weapon of choice for cybercriminals looking to steal sensitive information and launch devastating attacks on cryptocurrency systems.
With just a few keystrokes, these hackers can falsify IP addresses, email addresses, and user credentials, tricking unsuspecting victims into believing that they are someone else resulting in the theft of valuable Bitcoin, the disruption of critical systems, and untold financial losses.
According to Sphere 3D’s recent announcement, their relationship with Gryphon has worsened. The two companies had previously contemplated a merger, but ultimately decided to cancel it in April of the previous year due to shifting market conditions.
Trompeter says her job, first and foremost, is to safeguard the assets of the Company and maximize shareholder value.
“The 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. Gryphon has failed to act with integrity, has failed to honor our contract, and we will hold them accountable,” she said
Regulators voice concerns about the environmental impact of Bitcoin mining
Last month US Senator Edward Markey and Representative Jared Huffman have announced their plan to reintroduce the Crypto-Asset Environmental Transparency Act in Congress.
The proposed legislation aims to increase transparency around the environmental impact of crypto mining. If passed, the bill would require crypto mining companies to disclose their emissions for operations that use over 5 megawatts of power, or for multiple mining facilities owned by the same company that collectively use 5 megawatts of power or more.
In light of several notable failures last year, US lawmakers have intensified their efforts to regulate the crypto industry.
The Securities and Exchange Commission (SEC) has taken a leading role in cracking down on crypto companies, charging exchanges, lending platforms, and other digital asset firms with violating securities laws.
