Bitcoin miner Sphere 3D has refuted reports of financial distress, dismissing allegations made by its former partner Gryphon Digital Mining as "disingenuous at best." In response to Gryphon's complaint seeking to freeze millions of dollars, Sphere 3D filed a court document denying claims that it is "on the brink of bankruptcy." The dispute unfolded in the U.S. District Court for the Southern District of New York.
According to Sphere 3D's court filing, Gryphon sought court permission to recover $10 million in equity proceeds that Sphere received from a settlement related to Core Scientific's bankruptcy exit. Gryphon argued that this move was necessary due to Sphere's purported inability to pay approximately $30 million in future breach of contract judgments. However, Sphere 3D contested these assertions, citing its 2023 annual report, which claims $45 million in assets and $5 million in liabilities.
The legal dispute between Gryphon and Sphere stems from their prior partnership governed by a Master Services Agreement (MSA) since 2021. Gryphon served as the exclusive provider of blockchain and cryptocurrency operations management services for Sphere. However, relations soured in April 2023 when Sphere initiated legal action against Gryphon over an alleged deception leading to the unauthorized transfer of 26 Bitcoins.
Additionally, Gryphon accused Sphere of breaching the MSA by entering into hosting agreements without Gryphon's consent. Sphere countered these claims, asserting that it was permitted to enter into contracts with third parties under the MSA and through independent discussions with Gryphon. Sphere argued that any breaches were minor technical violations and did not warrant the substantial damages sought by Gryphon.
Furthermore, Sphere is pursuing over $25 million in damages from Gryphon for failing to file a proof of claim in the Core Scientific bankruptcy case. Sphere had provided a $35 million deposit to Core for hosting services, but Core declared bankruptcy before fulfilling its obligations. After reaching a $10 million settlement with Core, Sphere faced complications due to Gryphon's contract with Core and Gryphon's failure to file a timely proof of claim in the bankruptcy case.
The dispute highlights the complexities and tensions within the cryptocurrency mining industry, particularly regarding contractual obligations and financial responsibilities. Both parties are entangled in legal wrangling as they seek to protect their respective interests and recover losses incurred during their partnership.
