Core Scientific Inc., one of the major bitcoin mining companies by mining power, today filed for Chapter 11 bankruptcy protection in Texas amid falling cryptocurrency markets and rising energy prices.
Core Scientific is a cryptocurrency mining company that does “proof-of-work” computation mining for currencies such as bitcoin. The company runs banks of sophisticated computing equipment that does the computational work that secures blockchain networks in order to create new cryptocurrency tokens and earn coins. The process uses expensive equipment and a great deal of electricity.
According to the company, it is still mining bitcoin and will continue to operate its existing hosting solutions for customers, which are generating positive cash flows on a debt-free basis. However, according to a person familiar with the filing told CNBC this is not enough to upkeep the company’s equipment leases and other operating costs.
The company has mining operations in Texas, North Dakota, North Carolina, Georgia and Kentucky. Core Scientific represents almost 10% of the total computing power on the bitcoin network, operates almost 143,000 mining rigs, and hosts over 100,000 in its data centers.
Core Scientific’s stock is down 98% this year as crypto markets have plunged during a bear market following multiple industry shocks during 2022. Bitcoins price, in particular, a bellwether for the broader markets, has fallen more than 70% from all-time highs of over $68,000 in November 2021 to $16,859.
These market conditions led multiple industry players to file for bankruptcy including crypto lender Celsius Network, which filed in July. Celsius was a customer of Core Scientific and was unable to pay back its debts to the miner as part of its bankruptcy.
In order to restructure itself, Core Scientific has entered into an agreement with some of its creditors in what is called a prepackaged bankruptcy. In this sort of bankruptcy, the debtor, in this case, Core Scientific, has come to an agreement before officially filing for bankruptcy.
According to the press release, the miner expects restructuring support from more than “50% of the holders of its convertible notes” who will provide commitments of $56 million and up to $19 million more to help the company stay afloat in the form of “debtor-in-possession” facilities. The company said that this money, and from ongoing operations, will be used for the planned restructuring.
This bankruptcy follows the mining company Compute North filing for bankruptcy in September owing $500 million in assets to creditors, Compass Mining shut down its Georgia operations citing rising energy costs and ongoing depressed markets. This has only worsened with the collapse of the crypto exchange FTX, which has led to further volatility in crypto markets.