Crypto Bankruptcy with the Onset of Winter
2022.12.22 00:58
Crypto Bankruptcy with the Onset of Winter
Budrigannews.com – One of the largest publicly traded cryptocurrency mining companies in the United States, Core Scientific Inc. (CORZ.O) announced on Wednesday that it had filed for Chapter 11 bankruptcy protection. This is the latest in a long line of failures in the industry.
Core Scientific, based in Austin, Texas, blamed falling bitcoin prices, rising energy costs for bitcoin mining, and a $7 million unpaid debt from Celsius Network, a U.S. crypto lender and one of its biggest customers, for its bankruptcy.
Core Scientific stated in court filings that at the time of its bankruptcy filing, it had just $4 million in liquidity and a net loss of $434.8 million for the three months ending September 30, 2022.
Since October, when the company hired restructuring consultants, it has been negotiating with creditors about whether or not to file for bankruptcy.
In excess of a trillion bucks in esteem has been cleared out from the crypto area this year with increasing loan costs compounding stresses of a financial slump. Key industry players like Celsius and Three Arrows Capital, a crypto hedge fund, have been eliminated by the crash.
The most significant setback came as a result of the major cryptocurrency exchange FTX’s bankruptcy filing last month. Its quick fall has ignited extreme administrative investigation of how crypto firms hold assets and direct business activities.
Bitcoin, the most widely used digital currency, is down more than 60% this year, putting pressure on the crypto mining industry after experiencing rapid growth in 2020 and 2021.
Powerful computers connected to a global network process bitcoin transactions and “mine” new tokens by competing against one another to solve complex mathematical puzzles.
Yet, the business has become less beneficial as the cost of bitcoin has drooped, while energy costs have taken off.
Celsius, which petitioned for Part 11 chapter 11 assurance in July, claims a few bitcoin mining rigs facilitated at Center Logical’s offices. According to court filings, Core Scientific has been unable to collect on higher energy bills that the company is accruing at a rate of $900,000 per month due to Celsius’s bankruptcy.
Core Scientific stated that it would not liquidate and would pursue a restructuring supported by creditors who hold more than half of the convertible notes issued by the company.
If the restructuring is approved by the court, convertible noteholders would receive 97% of Core Scientific’s equity shares. These creditors have agreed to provide up to $56 million in debtor-in-possession financing.
More 2022 year of collapse cryptocurrencies
So far in 2022, the company’s shares have lost roughly 98% of their value, bringing its market capitalization down to about $78 million.
On Wednesday, the stock lost another 50% in trading. This year, Riot Blockchain (RIOT.O), Marathon Digital (MARA.O), and Hut 8 Mining Corp.’s shares have all lost more than 80%.
Core Scientific claimed in its bankruptcy petition that it has between 1,000 and 5,000 creditors and assets and liabilities of $1 billion and $10 billion, respectively.
In 2021, Core Scientific merged with a blank check company to go public in a deal that valued the miner at $4.3 billion at the time.
The first bankruptcy court hearing for Core Scientific has been scheduled for December 21 at 09:15 CT (or 15:15 GMT).
