Bitcoin Mining Firm Sphere 3D Sues Gryphon Digital Over Spoofing Attack – Here's What Happened
Bitcoin mining firm Sphere 3D is suing Gryphon Digital Mining, its business partner, for losing about $500,000 worth of Bitcoin due to a spoofing attack.
The firm accused Gryphon CEO Rob Chang of sending 18 Bitcoin to a fraudster who pretended to be Sphere 3D's CFO in January. A few days later, another eight Bitcoin were transferred using the same method, according to a Saturday press release.
Furthermore, Sphere 3D alleged that Gryphon provided poor services to its partner and misrepresented the Bitcoin miner's computing power in public disclosures.
“Today we filed litigation against Gryphon, the custodial management services provider of our blockchain and cryptocurrency-related services, for materially breaching the Master Services Agreement (“MSA”) we entered into with Gryphon,” Patricia Trompeter, CEO of Sphere 3D, said in a statement.
"We believe that Gryphon has put the Company's assets at significant risk and willfully violated their contractual duties."
The complaint was filed with the Southern District of New York.
The two businesses have been working together since August 2021, with Gryphon managing Sphere 3D's "crypto mining activities" and keeping the "fiduciary duties of Sphere's digital assets." Gryphon gets 22.5% of gross profit from Sphere's operation for its services.
Spoofing is an attempt to trick a user into believing that you are someone else. The attack is done by falsifying data, such as IP addresses, email addresses, or user credentials to gain access to a system, steal sensitive information, or launch further attacks.
The latest statement from Sphere 3D shows a deteriorated relationship between the company and Gryphon. The duo even once considered a merger, which was canceled in April last year “due to changing market conditions."
"Today's filing demonstrates that we will not only protect the Company that we all have worked so hard to navigate through the past year, but also that we will not be bullied or threatened by the likes of Gryphon," Trompeter added.
Regulators Express Concern About Environmental Impact of Bitcoin Mining
Regulators around the world have voiced concern about the environmental impact of Bitcoin mining.
Last month, US Senator Edward Markey and Representative Jared Huffman revealed intentions to reintroduce the Crypto-Asset Environmental Transparency Act in Congress in a bid to promote greater transparency around crypto mining and its environmental impacts.
The bill would require crypto mining companies to disclose emissions for operations that consume more than 5 megawatts of power or "multiple crypto-asset mining facilities that are owned by the same company and each have a power load that is less than 5 megawatts; but have a cumulative power load that is greater than or equal to 5 megawatts."
Similarly, US lawmakers have recently ramped up efforts to regulate the crypto industry in the wake of some high-profile failures last year.
The SEC, in particular, has been cracking down on crypto companies, charging exchanges, lending platforms, and other digital asset firms with violating securities laws.