Gryphon Digital Faces Lawsuit Over Bitcoin Transfer

Gryphon Digital, a cryptocurrency mining company, is embroiled in a legal battle against its former partner, Sphere 3D, following a contentious bitcoin transfer incident. In April, Sphere 3D accused Gryphon Digital’s CEO, Rob Chang, of transferring 18 bitcoins to an imposter posing as Sphere 3D’s Chief Financial Officer (CFO). Subsequently, an additional eight bitcoins were transferred, resulting in a cumulative loss of 26 bitcoins, valued at approximately $500,000 at the time.

Bitcoin Transfer Dispute

Patricia Trompeter, CEO of Sphere 3D, contended that Gryphon’s actions jeopardized assets and breached contractual obligations. Trompeter asserted that Gryphon’s behavior was a “willful” breach of duty. In response, Gryphon has raised accusations against Sphere 3D, citing breach of contract and defamation.

According to court documents submitted on August 18 and reported by Cointelegraph, Gryphon seeks the dismissal of the lawsuit, attributing the bitcoin loss to Sphere 3D’s “gross negligence.” The documents claim that Sphere 3D’s lack of diligence in safeguarding its technology systems enabled the transfer of over $500,000 worth of bitcoin to an adversarial actor, leading to unrecoverable losses for Gryphon. The incident hinges on a spoofing attack, a scheme where malicious actors pose as credible entities to manipulate systems or individuals. Typically executed through methods like fraudulent emails or IP addresses, this type of attack results in unauthorized access, data theft, or redirecting victims to malicious activities.

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Legal Response to Failed Merger

The legal dispute follows a collaborative effort initiated in August 2021, with Gryphon overseeing Sphere 3D’s cryptocurrency mining operations. Initial plans for a merger under Gryphon’s banner were discussed, but by April 2022, both parties abruptly terminated merger discussions, citing mutual agreement.

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Gryphon’s response also includes seeking legal counsel from K&L Gates, indicating the company’s commitment to addressing the lawsuit with a strategic approach. The legal confrontation underscores the complexity and potential risks inherent in the cryptocurrency space, emphasizing the importance of robust security measures and contractual diligence in such partnerships.