Core Scientific has filed for Chapter 11 bankruptcy protection.
The company will continue its mining operations during the bankruptcy proceedings.
Bitcoin mining giant Core Scientific Inc. has filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Southern District of Texas. The mining firm’s liabilities are estimated to be between $1 billion and $10 billion. The bankruptcy filing revealed that it has between 1000 to 5000 creditors.
Falling crypto prices and rising energy costs
Core Scientific is one of the largest players in the mining space. Although several popular names like Compute North have sought protection under Chapter 11, Core Scientific’s bankruptcy filing makes it the first publicly listed mining firm to do so.
The company’s decision comes after a bearish year that saw crypto prices slump amid rising energy prices. This year has also seen Bitcoin’s mining difficulty at record highs. Core Scientific’s operations primarily involve mining Bitcoin and hosting data centers across the country.
Positive cash flow not enough to sustain operations
According to a report by CNBC, Core Scientific is generating positive cash flow. However, this income is not enough to service the financing debt that the mining firm took out to lease mining equipment.
“The company will not liquidate but will continue to operate normally while reaching a deal with senior security noteholders, which hold the bulk of the company’s debt,” the source told CNBC.
Core Scientific made a filing with the Securities and Exchange Commission in late October. The filing revealed that the Texas-based mining firm may run out of cash before the end of this year, prompting it to resort to bankruptcy protection.
The firm also stated that it would stop making debt payments to its creditors due to its financial predicament.
Share price down 98% YTD
Apart from the slumping crypto prices and rising energy costs, non-repayment from bankrupt crypto lender Celsius also affected Core Scientific’s finances.
Data from MarketWatch shows that the mining firm’s share price has tanked 98% since the beginning of 2022. The stock is currently trading at $0.148, down from its all-time high of $14.32.
Its market capitalization went from its 2022 high of $3.42 billion to $75 million as of press time.