BTC block reward miner Core Scientific has entered an agreement with Celsius Network to shut down the bankrupt digital asset lender’s mining rigs, a new report has revealed.
Core Scientific offers hosting services for clients, with its most recent update revealing that it operates over 100,000 servers dedicated to this service. One of its biggest clients was Celsius Network, but since the lender filed for bankruptcy in July, it has been unable to meet its financial obligations towards Core.
In a dispute that started in October, Core has been pushing to power off the miners, alleging that Celsius already owed $7.8 million in operational costs.
In a court filing two weeks ago, Core told the court that by turning off the miners, it would save around $30,000 daily. In addition, the space taken by Celsius’ miners could be sold to other partners and bring in over $2 million in additional income to the embattled mining firm.
As Bloomberg now reports, the two companies—both of whom have filed for bankruptcy—have agreed to shut down the 37,000 mining rigs.
Core has been in a legal dispute with a few other clients who have been unable to meet their costs and are seeking to turn off their mining rigs as well. According to Ethan Vera, the chief operations officer at block reward mining services firm Luxor Technologies, the agreement is a big win for Core in similar ensuing legal battles.
“While the legal case is still ongoing, this is a strong win for Core Scientific who is likely facing other potential litigation from their hosting clients that had their cost increased. Partners will be less inclined to take them to court if there is precedent set for turning off the machines while the legal dispute is ongoing,” Vera stated.
Celsius Network and Core Scientific’s bitter breakup
Celsius says it’s in agreement with the proposal amid its bankruptcy proceedings. The company’s attorney, Chris Koenig of the Kirkland & Ellis law firm, said in a hearing:
“We’ve agreed that they can turn off our rigs effective today, and that they don’t get to charge us, we don’t continue to pay for it.”
However, Koenig criticized Core for hiking the hosting fees in breach of their contract. In addition, Core allegedly blocked Celsius from joining an Ad Hoc committee of secured convertible noteholders who have been discussing restructuring their debt to the miner. This is despite Celsius being one of Core’s largest noteholders, holding $54 million of secured convertible notes.
With both parties agreeing to the proposal, all that remains is for the legal teams to agree on a transition plan.
Core Scientific filed for Chapter 11 bankruptcy last month following a continued decline in revenue and a 99% share slump. The company cited non-payments from some of its clients, whose rigs it has continued hosting, as one of the key reasons for its downfall and bankruptcy. Celsius, which was Core’s biggest client, was cited as one of the key reasons for the miner’s downfall.
All hope is not lost for Core, however. This week, BlackRock extended a $17 million facility to the miner as part of a $75 million loan package. BlackRock is already the biggest Core shareholder and stands to lose the most if Core goes under. The loan is part of a prearranged bankruptcy proceeding.
B.Riley, a Los Angeles-based investment bank, had extended a $75 million credit facility to the miner as well. The bank has the largest unsecured claim at Core.
Follow CoinGeek’s Crypto Crime Cartel series, which delves into the stream of groups—from BitMEX to Binance, Bitcoin.com, Blockstream, ShapeShift, Coinbase, Ripple,
Ethereum, FTX and Tether—who have co-opted the digital asset revolution and turned the industry into a minefield for naïve (and even experienced) players in the market.
New to blockchain? Check out CoinGeek’s Blockchain for Beginners section, the ultimate resource guide to learn more about blockchain technology.