In April, Sphere 3D alleged that Gryphon Digital CEO Rob Chang transferred 18 bitcoins to an impostor posing as its chief financial officer.

Eight additional bitcoins were transmitted to the address, bringing the total loss to 26 bitcoins, or approximately $500,000 at the time.

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Patricia Trompeter, CEO of Sphere 3D, stated that Gryphon placed assets at risk and "willfully" breached contractual obligations.

Cointelegraph, citing court documents filed on August 18, reports that Gryphon wants the lawsuit dismissed and blames "gross negligence" on Sphere for the incident.

"Sphere's complete and utter disregard for the protection, security, and control of its technology systems led to Gryphon sending over $500,000 in bitcoin to the hostile threat actor, which Gryphon has been unable to recover," according to the documents.

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The nature of the fraud, a spoofing attack, entails a hacker posing as a reputable entity in order to target systems or individuals. Typically, these schemes occur across multiple platforms, such as emails or IP addresses, and involve illicit access, information theft, or the redirection of users to harmful activities.

Gryphon charges Sphere with libel.

Gryphon has also responded with accusations of contract breach and defamation against Sphere 3D.

The legal dispute stems from a partnership that began in August 2021, in which Gryphon oversaw Sphere 3D's cryptocurrency mining operations.

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Initially, a merger under the Gryphon banner was a possibility. In April 2022, both parties abruptly terminated merger negotiations, asserting it was a mutual decision.

Gryphon is contacting K&L Gates for legal counsel.