Gryphon’s Attempt to Block $10M Escalates Sphere 3D’s Legal Issues

A new development has occurred in the ongoing legal battle between Bitcoin miners Sphere 3D and Gryphon Digital Mining. Gryphon has filed a pre-motion letter with the U.S. District Court for the Southern District of New York, requesting permission to file a motion for prejudgment attachment. They are seeking to secure $10 million in equity proceeds that Sphere recently received from a settlement with Core Scientific. Gryphon wants to ensure that these funds are available to cover any potential judgment they may receive due to Sphere’s alleged breach of contract, which has resulted in damages of at least $30 million.

The basis for Gryphon’s legal action lies in Sphere’s financial health. In Gryphon’s letter, they point to Sphere’s annual report to the Securities and Exchange Commission, which indicates that the company has acknowledged its potential for bankruptcy. This raises concerns that Sphere may not be able to satisfy future judgments. The letter states that Sphere has revealed its growing financial troubles, with a net loss of $200 million and recent losses surpassing revenue by a two-to-one margin.

Sphere’s latest earnings report confirms their financial struggles. They reported a net loss of $23.4 million for 2023, compared to $192.8 million the previous year. This decline in earnings can be attributed to the impact of the crypto winter on miners.

The legal dispute between Sphere and Gryphon dates back to April 2023 when Sphere first sued Gryphon following an alleged spoofing attack that resulted in the irregular transfer of Bitcoin. In January 2023, Gryphon’s CEO was scammed into sending Bitcoin to a spoofing attacker posing as Sphere’s CFO. Gryphon accused Sphere of “gross negligence” that allowed the malicious activity to occur.

Gryphon has filed claims against Sphere for breach of contract, negligence, and defamation in addition to dismissing allegations related to the transfer of assets. The partnership between the two companies was terminated in October 2023.

reached out to Sphere for comment but did not receive an immediate response. The legal battle between these Bitcoin miners continues, with Gryphon taking steps to secure funds from Sphere’s recent settlement to cover potential damages.

Leave a Reply