The ‘crypto’ contagion is beginning to hit digital currency miners. Compass Mining, the company that sells proof-of-work mining hardware and hosting services with locations in the USA, Canada, and Iceland, has allegedly failed to pay its utility bills and monthly hosting fees at a facility owned by Dynamics Mining.
Effective June 14th @compass_mining facility hosting agreement in Maine was terminated by @dynamics2k for failure to pay power consumption charges. 6 late payment and 3 non payments. @MiningScandals pic.twitter.com/cSfnWMmqTY
— DynamicsMining (@DynamicsMining) June 27, 2022
Dynamics argues that Compass Mining had six late payments and three non-payments. But Compass mining has denied the allegations and says that “Dynamics misunderstood the contracts that it signed with respect to its facilities and its obligations thereunder. Compass has performed all of its obligations under its contracts with Dynamics, including its financial obligations.”
However, shortly after the allegations surfaced, Compass Mining announced that its CEO Whit Gibbs and Chief Finance Officer Jodie Fisher had resigned. Compass’s board of directors appointed Chief Technology Officer Paul Gosker and Chief Mining Officer Thomas Heller as interim co-presidents and CEOs to lead the company as the board begins its search for a permanent President and CEO, and CFO.
“Compass Mining was created to make mining easy and accessible. We recognize that there have been multiple setbacks and disappointments that have detracted from that objective. Through this restructuring, the company is wholly focused on regaining the goodwill of our stakeholders and the community, as well as delivering on our mission of providing best-in-class service for miners of all sizes. These changes are being implemented to achieve the next level of growth for Compass Mining,” said Compass Mining in their official announcement.
Digital currency insolvency
In the last few weeks, we have seen some of the biggest money managers and borrowing/lending platforms signal that they are having financial trouble. We have also seen the counter-parties that work with these entities announce their liquidity and insolvency issues. The Compass Mining allegations, resignations, and restructuring signal that the recent downturn in the digital currencies markets is having a negative effect on miners as well.
Many players in the digital currency space were overleveraged and taking significant risks with margins, but now that the prices of coins and tokens are falling across the board, digital currency companies are receiving margin calls and are being forced to liquidate so that they can fight another day. These events revealed that the companies operating in the digital currency space are very interconnected, causing every incident that takes place to have a domino effect on the others operating in the market.
According to FTX CEO Sam Bankman-Fried, “There are some third-tier exchanges that are already secretly insolvent. There are companies that are basically too far gone and it’s not practical to backstop them for reasons like a substantial hole in the balance sheet, regulatory issues, or that there is not much of a business left to be saved.”
Bankman-Fried added that more digital currency exchange failures are on the way, which will most likely impact many digital currency businesses and the entities they work with.
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