One of the Largest Bitcoin Mining Firms Just Filed For Bankruptcy – Here’s What it Means for the Crypto Industry
Core Scientific, one of the largest Bitcoin mining companies, has filed for bankruptcy amid plunging cryptocurrency prices and skyrocketing energy prices, becoming the latest victim of the ongoing crypto winter.
On Wednesday, the firm filed for Chapter 11 bankruptcy protection in Texas. The filing notes that Core Scientific has $1 to $10 billion in assets, and also $1 to $10 billion in liabilities.
The company has attributed its bankruptcy to a $7 million unpaid debt from Celsius Network, a bankrupt cryptocurrency lending company, besides slumping crypto prices and rising energy costs for mining.
In the court filings, Core Scientific said that it had suffered a net loss of $434.8 million for the three months ending September 30, 2022, and had just $4 million in liquidity at the time of its bankruptcy filing. The company had revealed that bankruptcy is on the table by the end of October.
Core Scientific mines for proof-of-work cryptocurrencies like Bitcoin. The process, which requires expensive equipment and a lot of electricity, involves powering data centers across the country, packed with highly specialized computers that crunch math equations in order to validate transactions and simultaneously create new tokens.
Core Scientific gained a record valuation of $4.3 billion in mid-2021 when the company went public through a special purpose acquisition vehicle or SPAC. However, the company’s market capitalization had fallen to $78 million as of the end of trading Tuesday, with its stock down by over 98% over the past year.
Aside from Core Scientific, other crypto mining firms are also struggling amid the market downturn. Argo Blockchain, Iris Energy, and Greenidge Generation are among the more notable Bitcoin mining companies to face financial issues.
This year has been one of the worst on record for the crypto sector, with over a trillion dollars in value wiped out from the market. Rising interest rates as well as exacerbating worries of an economic downturn have further attributed to slumping prices.
While the crypto market crash has eliminated key industry players such as crypto hedge fund Three Arrows Capital and Celsius, the biggest blow came after FTX, once the third-largest crypto exchange in the world, filed for bankruptcy protection last month.
As reported, Sam Bankman-Fried, the disgraced founder of FTX, was arrested in the Bahamas earlier this month after US prosecutors formally filed criminal charges against him.
The Southern District of New York has indicted SBF on eight criminal charges including wire fraud and conspiracy by misusing customer funds. Separately, the Securities and Exchange Commission charged SBF with “orchestrating a scheme to defraud equity investors in FTX.