Crypto Miner Core Is Filing for Chapter 11 Bankruptcy

In Texas, early on Wednesday morning, Core Scientific, one of the country’s biggest traded crypto mining businesses, files for Chapter 11 bankruptcy protection. The choice follows a year of rising energy prices and dropping crypto prices.

Core Scientific mines for coins that require proof of work, like bitcoin. The process involves supplying electricity to data centers nationwide with specialized computers. The process requires expensive equipment, specialized knowledge, and a lot of electricity.

When Core went public via a Special Purpose Acquisition Vehicle (SPAC) in July 2021, its market capitalization had grown from $4.3B to $78M. The stock price has fallen by more than 98% in the past year.

Holders of Core’s common stock previously stated in a filing from October that they might suffer a total loss of their investment, but if the industry recovers, this might not be the case. The deal struck with Core’s holders of convertible notes should prevent common equity holders from losing everything if the business environment for bitcoin improves.

A client of Core was the cryptocurrency lender Celsius, which filed for bankruptcy in July. The strain on Core’s balance sheet caused by Celsius’s debts being forgiven during its bankruptcy proceedings is yet another illustration of the crypto sector’s contagious effect this year.

One of the biggest miners of digital assets and providers of blockchain infrastructure in North America, Core is not the only company experiencing difficulties.

A different miner, Marathon Digital Holdings, disclosed an exposure to Compute North of $80M when it filed for Chapter 11 bankruptcy. Compute North offers infrastructure and hosting services for crypto mining.