Core Scientific, the largest bitcoin miner by computing power, filed for Chapter 11 bankruptcy protection as this year's slump in crypto prices claimed another victim.
The company estimated its assets and liabilities at between $1 billion and $10 billion, according to the filing with the U.S. Bankruptcy Court for the Southern District of Texas on Wednesday.
Core’s struggles reflect those of the entire mining industry, which has seen profit margins continuously shrink, as bitcoin prices decline and energy costs go up. Revenues fell 20% just last month, according to data from The Block Research.
Core Scientific estimated it had between 1,000 and 5,000 creditors, with $42.4 million owed to its largest creditor, financial services firm B. Riley.
The company runs its own machines and acts as a hosting provider for others. Between the two sides, it operates about 24.4 EH/s, according to an October update, compared to the roughly 244 EH/s of the entire network.
The company warned in October that it could run out of cash by the end of the year. Things seemed to be turning around last week, with B. Riley offering the miner a $72 million financing package and arguing that bankruptcy was not the answer to Core’s problems. It’s unclear where that offer now stands.
The Block reached out to both firms but did not hear in time for publication.
Mining companies Argo Blockchain and Greenidge Generation have also recently floated the possibility of an impending bankruptcy, while hosting provider Compute North already filed for Chapter 11 protection back in September.
Both companies are trying to avoid that fate, with Argo saying last week that it was in "advanced negotiations with a third party" to sell certain assets and secure equipment financing, after accidentally stating on the website that it was filing for chapter 11 bankruptcy. Greenindge, meanwhile, entered into a non-binding debt restructuring deal with its lender NYDIG to pay down $74 million in debt by selling off assets.
Insufficient cash flow
While Core Scientific is still generating positive cash flow, it's not enough to repay debt owed on the Bitcoin mining equipment it leases, CNBC reported earlier, citing a person familiar with the situation.
Core’s total debt was around $1 billion as of October, the company said. Among its list of creditors is the now-bankrupt crypto lender BlockFi, crypto financial services firm NYDIG and Anchor Labs, the parent company of digital asset bank Anchorage Digital.
"In the event of a bankruptcy proceeding or insolvency, or restructuring of our capital structure, holders of the company’s common stock could suffer a total loss of their investment," the company said in a U.S. Securities and Exchange Commission filing.
Core will continue to operate normally while reaching a deal with senior security noteholders, CNBC also reported.
A large portion of Core Scientific's loans were taken out to finance hardware and infrastructure improvements, most starting in the second half of 2021, when bitcoin prices were on the rise (reaching a peak of nearly $70,000 in November) and miners were racing to grow their operations.
Core Scientific is involved with an ongoing legal dispute with the mining arm of also bankrupt crypto firm Celsius over what it claims are unpaid bills.
The company's shares had fallen 23.5% in pre-market trading as of 6.30 a.m. ET.
The case is number: 22-90342.
This article was updated after publication to include more context.
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