The ‘crypto winter‘ has claimed yet another major player in the BTC ecosystem—this time, it’s Core Scientific (NASDAQ: CORZW). Core has filed for Chapter 11 bankruptcy on December 21 following a continued decline in revenue and a 99% share slump since mid-2021.
The miner filed for bankruptcy in the Southern District of Texas, just a couple of months after it warned that it might have to turn to bankruptcy after depleting its cash reserves.
In its filing, the company estimated its liabilities to be between $1 billion to $10 billion. It estimated its assets to be between $1 and $10 billion as well, in line with its previous quarterly earnings report, which put its assets at $1.4 billion and its liabilities at $1.3 billion.
While the winter has claimed its fair share of block reward miners, Core Scientific is by far the largest casualty. The company directly operates 143,000 mining rigs, according to its most recent filing with the SEC. It hosts another 100,000 rigs for other miners.
As of the end of October, its rigs generated 14.4 exahash per second (EH/s) of BTC hash rate, with the other hosted rigs generating another 10 EH/s. Collectively, Core Scientific accounted for a bit over 10% of the global BTC hash rate.
Being the largest American miner, it has been the hardest hit by this year’s ‘crypto contagion’ under which many giants have collapsed. Its share price has continued to drop throughout the year in line with the price of BTC. An October announcement that it was exploring bankruptcy filing was the last straw, and at press time, it was trading at $0.158.
The company’s market cap has dipped drastically to $55 million, a 99% drop from its $4.3 billion valuation when it went public in July last year via a special purpose acquisition vehicle. It was valued at $3 billion as recently as April this year.
Bear market and ‘crypto contagion’ catch up with Core Scientific
Core Scientific revealed in a press release that it would not be liquidating its assets despite filing for bankruptcy. Rather, it settled on a deal with its creditors in a restructuring support agreement.
While it goes through the bankruptcy process, the company will continue to operate its self-mining and hosting operations which it claims remain cash flow positive despite its woes.
“The Company is committed to operating normally during the implementation of its restructuring. The company remains dedicated to providing hosting services and self-mining in its state-of-the-art data centers,” it stated.
In its deal with the creditors, the company secured $75 million in the form of debtor-in-possession facilities. It hopes the funds, coupled with the cash it generates from selling the mined BTC, will finance the planned restructuring. The creditors will then convert their debt into a majority of the company’s common stock that will emerge from the bankruptcy process.
The bankruptcy filing comes just a week after investment bank B. Riley offered to extend a $75 million credit facility to Core to help it avoid bankruptcy. B. Riley, which has the largest unsecured claim at Core, pledged to offer $40 million immediately and with zero contingencies. The rest of the money would only be available if Core suspended all payments to equipment lenders until the price of BTC hit $18,500.
While the bear market and hiking energy prices played a big part in its downfall, Core was also dealt a big blow by the collapse of some of its key allies and partners this year. This included Celsius Mining, the BTC mining arm of collapsed lender Celsius Network. Core claims that Celsius Mining owes it millions of dollars for the provision of hosting services. Core also had ties to BlockFi, yet another lender whose links to FTX led to its bankruptcy filing last month.
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