In a statement for investors, Sphere 3D CEO Patricia Trompeter announced that the company has filed a lawsuit against Gryphon Digital Mining, its partner in charge of managing its crypto mining activities and maintaining the fiduciary duties of Sphere’s digital assets. According to Trompeter, Gryphon has materially breached the Master Services Agreement (MSA) the two companies entered into, and has put the company’s assets at significant risk.
The lawsuit stems from an alleged spoofing attack that occurred on January 18, 2022. The complaint alleges that Gryphon CEO Rob Chang wired BTC to a fraudster posing as Sphere 3D’s chief financial officer. The complaint also states that another eight Bitcoin were sent to the same address a few days later. A spoofing attack occurs when an attacker attempts to trick a system or user into believing that they are someone else through falsifying data, such as IP addresses, email headers, or user credentials, to gain access to a system, steal sensitive information, or launch further attacks.
Sphere 3D and Gryphon Digital Mining have been partners since August 2021. Gryphon is responsible for managing Sphere 3D’s crypto mining activities and maintaining the fiduciary duties of Sphere’s digital assets. In return, Gryphon receives 22.5% of Sphere’s gross profit.
The relationship between the two companies appears to have deteriorated significantly. Trompeter’s statement suggests that the companies were once considering a merger. She also noted that the filing demonstrates that Sphere 3D will not be bullied or threatened by Gryphon. Trompeter stated that Gryphon has failed to act with integrity, failed to honor their contract, and that Sphere 3D will hold them accountable.
In conclusion, the lawsuit filed by Sphere 3D against Gryphon Digital Mining highlights the risks associated with the custody and management of digital assets. Spoofing attacks are a significant threat to the security of digital assets, and companies must take proactive steps to protect themselves and their clients from such attacks. As the crypto industry continues to evolve and grow, the need for robust security measures and contractual agreements that protect both parties will become increasingly important.