Bitcoin miner Sphere 3D refutes Gryphon’s claims of financial doubts: 'Disingenuous'

Ana Paula Pereira4 hours agoBitcoin miner Sphere 3D refutes Gryphon’s claims of financial doubts: "Disingenuous"Sphere 3D has denied reports of financial troubles by its former partner Gryphon Digital Mining, following the escalation of litigation between the Bitcoin miners.963 Total views16 Total sharesListen to article 0:00NewsOwn this piece of crypto historyCollect this article as NFTJoin us on social networksBitcoin miner Sphere 3D has denied reports of financial troubles, claiming that accusations from its former partner Gryphon Digital Mining are “at best disingenuous.”

In a court document shared with Cointelegraph, Sphere 3D refuted accusations made a few days earlier by Gryphon to the United States District Court for the Southern District of New York, requesting a block on millions of dollars on grounds that Sphere was on the “verge of economic collapse.”

On March 25, Gryphon requested court permission to file a motion seeking to secure $10 million in equity proceeds that Sphere recently received from a settlement related to Core Scientific’s bankruptcy exit. According to Gryphon, the move was necessary since Sphere could not pay roughly $30 million in future breach of contract judgments.

Sphere 3D, on the other hand, claims to have $45 million in assets and $5 million in liabilities, per its 2023 Annual Report. “A judgment of even $30 million could be rendered against Sphere tomorrow and it would have the means to pay,” reads the document. The company also accused Gryphon of unreasonably multiplying the proceedings, including through counterclaims later dropped.Sphere 3D"s response to a pre-motion letter filed by Gryphon Digital Mining. Source: Dontzin Nagy & Fleissig/Sphere 3D.

As a result of the market downturn, crypto miners endured a tough winter between 2022 and 2023. According to a source familiar with the litigation, Gryphon’s move to get $10 million from Sphere might be related to its own financial difficulties.

“Since April of 2023, it’s been back and forth [...] They [Gryphon] have $18 million in assets, and $27 million in liabilities, which means they have $9 million of negative working capital [...] And on top of that, it looks like from their loan agreement, every single amount of excess income that they generate has to go to pay down their loans with Anchorage,” noted the source.The MSA breach

Before their legal dispute, Gryphon and Sphere were bound by a Master Service Agreement (MSA) since 2021, in which Gryphon served as the exclusive provider of management services for Sphere’s blockchain and cryptocurrency operations. Gryphon managed certain digital assets for Sphere, selling them as instructed by the company.

The relationship eroded in April 2023, when Sphere initiated legal action against Gryphon following analleged spoofing incident that resulted in the unauthorized transfer of 26 Bitcoin (BTC) to a malicious actor. Gryphon contended it was the victim of Sphere’s “gross negligence,” blaming them for the security breach.

Furthermore, Gryphon alleges Sphere breached the contract by entering into four hosting agreements without Gryphon’s consent. Sphere contends that under the MSA, and through independent discussions with Gryphon, it was allowed to enter contracts with third parties. Sphere also argues that any breaches it committed were minor “technical breaches” and do not justify the large damages Gryphon is seeking.

Related: Sphere 3D’s legal issues escalate as Gryphon seeks to block $10MSphere 3D seeks $25 million in damages

Sphere is also seeking damages exceeding $25 million from Gryphon, under claims of failure to file a proof of claim in Core Scientific’s bankruptcy case.

Sphere provided $35 million in deposits to Core for hosting services, but only rendered about $1 million in services. After Core declared bankruptcy, Sphere eventually settled with Core for $10 million in reorganized equity.

A critical issue for Sphere was the contract that Gryphon entered with Core. This led to a complex situation where Core argued Sphere was not directly involved, complicating Sphere’s efforts to recover its deposits. This situation was further exacerbated by Gryphon’s failure to file a proof of claim in Core’s bankruptcy case by the set deadline.

Magazine: Is measuring blockchain transactions per second (TPS) stupid in 2024? Big Questions# Mining# Business# Bitcoin Mining# United StatesAdd reactionRead moreSEC enforcement director claims crypto industry makes ‘creative attempts’ to avoid guidelinesMeta’s metaverse lab has lost $40B since Facebook changed its name in 2021$2.7T general insurance industry meets tokenized RWAs: Nayms joins Cointelegraph Accelerator