Core Scientific Files For Bankruptcy As Crypto Winter Bites, CIO News, AND CIO
Based in Austin, TX Basic scientist attributed its bankruptcy to falling bitcoin prices, rising energy costs for bitcoin mining, and $7 million in unpaid debt from WE crypto lender Celsius Network, one of its biggest clients.
Core Scientific said in court documents that it suffered a net loss of $434.8 million for the three months ending September 30, 2022 and had only $4 million in cash at the time of his bankruptcy filing.
The company hired restructuring advisers in October and has since been negotiating with creditors over a potential bankruptcy filing.
More than $1 trillion in value has been wiped out of the crypto sector this year, with rising interest rates heightening fears of an economic slowdown. The crash knocked out key industry players such as crypto hedge fund Three Arrows Capital and Celsius.
The biggest blow came after a major crypto exchange FTX filed for bankruptcy protection last month. Its rapid fall has sparked harsh regulatory scrutiny of how crypto firms hold funds and conduct business operations.
After rapid growth in 2020 and 2021, bitcoin – by far the most popular digital currency – is down more than 60% this year, putting pressure on the crypto mining industry.
The processing of bitcoin transactions and the “mining” of new tokens is done by powerful computers, connected to a global network, which compete with others to solve complex mathematical puzzles.
But the business became less profitable as the price of bitcoin fell, while energy costs soared.
Celsius, which filed for Chapter 11 bankruptcy in July, owns several bitcoin mining rigs housed at Core Scientific facilities. Celsius’ bankruptcy has prevented Core Scientific from collecting higher energy bills, which the company is racking up at the rate of $900,000 a month, according to court filings.
Core Scientific has said it will not be liquidated and intends to pursue a restructuring backed by creditors who own more than 50% of the company’s convertible bonds.
Those creditors agreed to provide up to $56 million in debtor-in-possession financing, and the convertible bondholders would ultimately end up with 97% of Core Scientific’s stock if the restructuring were approved by the court.
The company’s shares have lost around 98% of their value so far in 2022, reducing its market capitalization to around $78 million.
The stock fell another 50% in Wednesday trading. Actions of other crypto miners, including Riot BlockchainMarathon Digital and Hut 8 Mining Corp have all lost more than 80% this year.
In its bankruptcy filing, Core Scientific said it had between $1 billion and $10 billion in assets and liabilities, and between 1,000 and 5,000 creditors.
Core Scientific went public in 2021 through a merger with a blank check company in a deal that valued the miner at $4.3 billion at the time.
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