Core science files bitcoin miners in the United States for bankruptcy

One of the largest US-listed bitcoin miners has filed for bankruptcy as the companies grapple with falling cryptocurrency prices and rising costs for the energy-intensive business of producing cryptocurrencies.

Core Scientific filed for Chapter 11 bankruptcy protection in Texas, where it is headquartered, on Wednesday. The company said it plans to continue operating and producing bitcoin while it closes a restructuring deal with its lenders and creditors.

The Nasdaq-listed cryptocurrency miner is a component of the Russell 2000 Index, a widespread benchmark for smaller US companies, which means its bankruptcy would hurt many investors’ wallets and add to the cryptocurrency industry’s woes.

Its market capitalization reached nearly $3 billion in April, but has since fallen below $100 million, according to FactSet data.

The company has operated facilities in five US states where computers run through complex equations in a race against other participants in the bitcoin network to create new units of the cryptocurrency.

It is one of many listed crypto miners whose stock has taken a hit as their profits have shrunk between falling cryptocurrency prices and rising global prices for the massive amounts of energy burned in the mining process.

Core Scientific began trading in January following a deal with a BlackRock-backed SPAC. Its stock is down 98 percent this year.

The company said the bankruptcy filing “was necessitated by the company’s declining operating performance and liquidity experiencing a prolonged decline in the price of bitcoin, increasing electricity costs . . . and failure of some hosting customers to meet their payment obligations.”

Core also suffered the bankruptcy of cryptocurrency lender Celsius Network, which collapsed in the summer. The two companies have been locked in a dispute over hosting of Core services to Celsius, adding to the miner’s financial pressures.

Bitcoin, the largest cryptocurrency, has fallen more than 65 percent this year against the dollar, hitting a two-year low. London-listed miner Argo Blockchain has shed 97 percent this year. The Valkyrie Bitcoin Miners ETF, which tracks a group of listed mining companies, has fallen about 80 percent since its launch in February.

Core has up to 5,000 creditors and between $1 billion and $10 billion in assets and liabilities, according to court filings. The company owes about $73 million to the 30 largest unsecured creditors, including unpaid taxes and energy suppliers. Its largest unsecured claim is $42 million owed to B Riley Financial Group, a lender to the crypto mining company.

In a public letter last week, B Riley said Core Scientific has borrowed hundreds of millions of dollars as part of the company’s “aggressive and ill-conceived strategy to continue building power facilities and expansion.”

“These loans were made when the price of Bitcoin was much higher than it is today, and the theoretical return to miners was much faster,” said President Bryant Riley.

Michael Bruce, Core’s senior vice president, said the company “did not approve” of Riley’s letter, according to a statement filed in court.

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