Key takeaways:
- Sphere 3D and Gryphon Digital Mining entered into a fresh legal battle in which the former aims to prevent the distribution of $10M from a recent settlement.
- The miner requests this in a pre-motion letter filed in the United States District Court for the Southern District of New York.
On March 25, Sphere 3D and Gryphon Digital Mining, two Bitcoin miners, entered into a fresh legal battle in which the former aims to prevent the distribution of $10 million from a recent settlement.
Gryphon requests permission to file a motion for prejudgment attachment to obtain $10 million in equity proceeds Sphere recently received from a settlement connected to Core Scientific’s bankruptcy exit. The miner makes the request in a pre-motion letter filed in the United States District Court for the Southern District of New York.
Gryphon wants to make sure that there is enough money on hand to pay any judgment that may be rendered against it for Sphere’s purported breach of contract, which may result in damages totaling at least $30 million.
It is alleged that Sphere violated the exclusivity condition of its deal with Gryphon by entering into at least four hosting agreements with other providers.
The pre-motion letter conceals Sphere’s financial situation. Based on Sphere’s annual report to the US Securities and Exchange Commission (SEC), Gryphon’s letter claims the company has openly admitted its bankruptcy risk and raised the possibility that it could not pay future judgments. It was stated in the letter:
“Over the last four months, Sphere has revealed its growing financial troubles. On November 28, 2023, in a filing in the Core Bankruptcy Action, Sphere’s counsel acknowledged that the company was operating with a $200 million net loss and that recent losses had overtaken revenue by a two-to-one margin,”
As the crypto winter slammed miners, Sphere’s net loss for 2023 dropped to $23.4 million from $192.8 million in the previous year, according to the company’s most recent earnings report, released on March 13.
Since August 2021, the businesses have collaborated and even explored combining under the Gryphon name. But in April 2023, Sphere filed its first lawsuit against Gryphon, claiming that a spoofing attempt had caused an erroneous Bitcoin transfer.
Rob Chang, the CEO of Gryphon, is said to have been tricked into paying 18 Bitcoin to a hacker impersonating Sphere 3D’s senior financial officer in January 2023. Eight additional Bitcoins were sent to the same address a few days later. At the time, Gryphon asserted that Sphere’s “gross negligence” had allowed bad actors to operate with impunity.
Apart from rejecting the charges concerning the transfer of assets, Gryphon has sued Sphere 3D for carelessness, slander, and contract breach. The collaboration ended in October 2023.
