Sphere 3D is being prevented from spending $10 million from a recent settlement with Core Scientific by Gryphon Digital Mining.
On March 25, Sphere 3D and Gryphon Digital Mining, two Bitcoin miners, entered into a fresh legal battle in which the latter aims to prevent the distribution of $10 million from a recent settlement.
Gryphon requests permission to file a motion for prejudgment attachment in a pre-motion letter filed with the U.S. District Court for the Southern District of New York. The miner wants to secure $10 million in equity proceeds that Sphere recently received from a settlement related to Core Scientific’s bankruptcy exit.
Gryphon wants to make sure that there are enough money on hand to pay any judgement 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 their 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 Securities and Exchange Commission, Gryphon’s letter claims the company has openly admitted its bankruptcy risk and raised the possibility that it could not be able to pay future judgements.
“Sphere has disclosed its mounting financial difficulties over the past four months. Sphere’s legal representative acknowledged in a filing in the Core Bankruptcy Action on November 28, 2023, that the company was running at a $200 million net loss and that recent losses had surpassed revenue by a two-to-one ratio.
As the cryptocurrency winter slammed miners, Sphere’s net loss for 2023 dropped to $23.4 million from $192.8 million in the prior year, according to the company’s most recent earnings report, released on March 13.
Since August 2021, the companies have collaborated and have even discussed combining under the Gryphon brand. Sphere, however, filed its first lawsuit against Gryphon in April 2023 following the purported spoofing assault that resulted in the erroneous transfer of Bitcoin.
Rob Chang, the CEO of Gryphon, is said to have been tricked into paying 18 Bitcoin to a hacker impersonating the chief financial officer of Sphere 3D 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 brought lawsuits against Sphere 3D for carelessness, slander, and contract breach. The collaboration came to an end in October 2023.