Bitcoin miner Core Scientific files for bankruptcy

Core Scientific Inc, which is one of the biggest publicly traded cryptocurrency mining companies in the United States, has filed for Chapter 11 bankruptcy protection.

The move was triggered by falling bitcoin prices, rising energy costs impacting bitcoin mining, and a $7 million unpaid debt from U.S. crypto lender Celsius Network, one of its biggest customers. 

In its court filings, Core Scientific claimed it had suffered a net loss of $434.8 million for the quarter ending September 30, 2022, and had just $4 million in cash reserves. 

The company started engaging with restructuring advisers and negotiating with creditors about a potential bankruptcy filing in October.

Celsius, which filed for Chapter 11 bankruptcy protection in July, owns several bitcoin mining rigs hosted at Core Scientific's facilities.

Celsius' bankruptcy has prevented Core Scientific from collecting on higher energy bills that the company is racking up at a rate of $900,000 per month, according to court filings.

Core Scientific said it would not liquidate, and intends to pursue a restructuring backed by creditors who hold over 50 per cent of the company's convertible notes.

Those creditors have agreed to provide up to $56 million in debtor-in-possession financing, and convertible noteholders would ultimately end up with 97 per cent of Core Scientific's equity shares if the restructuring is approved in court.

The company's shares have lost roughly 98 per cent of their value so far in 2022, shrinking its market cap to about $78 million.

The stock fell another 50 per cent in trading on Wednesday. Shares of other crypto miners including Riot Blockchain, Marathon Digital and Hut 8 Mining Corp have all shed more than 80 per cent this year.

In its bankruptcy petition, Core Scientific said it has $1 billion to $10 billion in assets and liabilities, and between 1,000 and 5,000 creditors.

Core Scientific went public in 2021 through a merger with a blank-check company in a deal that at the time valued the miner at $4.3 billion.

More than a trillion dollars in value has been wiped out from the crypto sector this year with rising interest rates exacerbating worries of an economic downturn.

The crash has eliminated key industry players such as crypto hedge fund Three Arrows Capital and Celsius.

The biggest blow came after major crypto exchange FTX filed for bankruptcy protection last month. Its swift fall has sparked tough regulatory scrutiny of how crypto firms hold funds and conduct business operations.

After rapid growth in 2020 and 2021, bitcoin - the most popular digital currency by far - is down more than 60 per cent this year, pressuring the crypto mining sector.

Processing bitcoin transactions and "mining" new tokens is done by powerful computers, hooked up to a global network, that compete against others to solve complex mathematical puzzles.

But the business has become less profitable as the price of bitcoin has slumped, while energy costs have soared.