United States: Celsius Contagion?: Another Crypto Miner Expected To File Bankruptcy

In an earlier post we discussed the bankruptcy filing of Compute North Holdings, Inc., a bitcoin miner felled by high electricity costs and falling cryptocurrency prices (see here). It may be followed shortly by another miner, Core Scientific, Inc., which announced on October 26, 2022 that it has similarly been severely impacted by rising electricity costs and the price of bitcoin. It also noted increases in the "global bitcoin network hash rate" as well as ongoing litigation with Celsius Networks and its affiliates. The company, whose stock is listed on NASDAQ under the symbol CORZ, is engaged in a battle with Celsius regarding the latter's failure to pay certain "utility tariffs" purportedly owing in relation to the hosting of Celsius' mining equipment at Core Scientific's data centers, among other things. In a filing earlier this month in Celsius' bankruptcy case, Core Scientific asserted that it was "losing approximately $1.65 million per month subsidizing Celsius's business." A hearing on Core Scientific's demand that Celsius pay these administrative expenses, among other things, has been scheduled for November 9, 2022 in Celsius' case. Core Scientific may have commenced its own case by that time.

In its 8-K, Core Scientific announced that it will be unable to make certain upcoming payments under financing arrangements. Such failure may lead to defaults under its other indebtedness, including two series of convertible notes. They have hired restructuring advisors and announced that alternatives include the filing for bankruptcy. As of the date of the 8-K, the company was holding 24 bitcoins and approximately $26.6 million in cash.

Meanwhile, Compute North Holdings' case has progressed rapidly. The company is engaged in a sale process and has scheduled an auction to begin on November 1, 2022.

We will provide further updates as on these matters as circumstances warrant.

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