Bitcoin mining company Sphere 3D has sued Gryphon Digital Mining, its business partner, for losing around $500,000 worth of bitcoins due to a spoofing attack.
The firm accused Gryphon CEO Rob Chang of sending 18 bitcoins to a fraudster posing as Sphere 3D’s CFO in January. According to a Saturday press release a few days later eight more bitcoins were transferred using the same method.
In addition, Sphere 3D alleged that Gryphon had provided a disservice to its partner and misrepresented the computing power of the Bitcoin miner in public communications.
“Today, we filed suit against Gryphon, the custodial provider of our blockchain and cryptocurrency-related services, for material breach of the Master Services Agreement (“MSA”) we entered into with Gryphon,” said Patricia Trompeter, General director of Sphere 3D. in the application.
“We believe that Gryphon exposed the Company’s assets to significant risk and willfully breached its contractual obligations.”
The complaint was filed in the Southern District of New York.
The two entities have been working together since August 2021, with Gryphon managing Sphere 3D’s “cryptocurrency mining” and retaining “fiduciary responsibilities for Sphere’s digital assets.” Gryphon receives 22.5% of Sphere’s gross profit for its services.
Spoofing is an attempt to make a user believe that you are someone else. The attack is carried out by spoofing data such as IP addresses, email addresses or user credentials to gain access to the system, steal sensitive information or launch further attacks.
Sphere 3D’s latest statement indicates a deteriorating relationship between the company and Gryphon. The duo even once considered a merger, which was called off last April “due to changing market conditions.”
“Today’s filing demonstrates that we will not only defend the Company that we have all worked so hard to build over the past year, but that we will not be intimidated or threatened by the likes of Gryphon,” Trompeter added.
Regulators have raised concerns about the environmental impact of bitcoin mining
Regulators around the world have expressed concern about the environmental impact of Bitcoin mining.
Last month, US Senator Edward Markey and Congressman Jared Huffman announced their intention to re-introduce the Crypto Assets Environmental Transparency Act in Congress in an effort to promote greater transparency about cryptocurrency mining and its environmental impact.
The bill would require cryptomining companies to disclose emissions information for operations that consume more than 5 megawatts of electricity, or “multiple cryptomining facilities owned by the same company that each have a capacity of less than 5 megawatts; but have a total power load greater than or equal to 5 megawatts.”
Similarly, US lawmakers have recently stepped up efforts to regulate the crypto industry after some high-profile missteps last year.
The SEC, in particular, is cracking down on crypto companies by charging exchanges, lending platforms and other digital asset firms for violating securities laws.
