Gryphon Digital is asking to be removed from a legal case initiated by its ex-partner, Sphere 3D, concerning a fraudulent Bitcoin transaction linked to a spoofing attack. Gryphon argues that the mishap was a result of security lapses on Sphere 3D’s end.
In the original lawsuit filed in April, Sphere 3D accused Gryphon CEO Rob Chang of transferring 18 BTC in January to an imposter claiming to be Sphere 3D’s CFO, under the guise of a spoofing attack. An additional eight Bitcoins were sent to the same fraudulent address shortly after, amounting to a total loss exceeding $500,000 at that time.
Gryphon contends that they are not to blame but are instead victims of Sphere 3D’s “grossly negligent” security practices. These allowed a bad actor to infiltrate Sphere’s computer systems, impersonate them through email, and trick Gryphon into sending cryptocurrency meant for Sphere 3D to a scammer instead.
Legal documents filed on August 18 state that “Sphere 3D’s abysmal failure to secure its technology systems led to Gryphon sending over half a million dollars in Bitcoin to an unauthorized recipient, which Gryphon has been unable to get back.”
Previously, Patricia Trompeter, Sphere 3D’s CEO, argued that Gryphon had “endangered the company’s assets and blatantly disregarded their contractual obligations.”
Gryphon is not just seeking dismissal of the allegations concerning the Bitcoin transfer but has also counter-sued Sphere 3D for breach of contract, negligence, and libel. This legal battle is the latest development in a partnership that originated in August 2021 when Gryphon took charge of Sphere 3D’s crypto mining operations. Originally, the firms intended to consolidate under the Gryphon brand, but these plans fell apart by April 2022, with both sides claiming the decision to terminate the merger was mutual.