Bitcoin Miner Files For Chapter 11 Bankruptcy
Anyone who has invested in Bitcoin or other types of cryptocurrency has likely been filing the news about various cryptocurrency exchanges filing for bankruptcy. As reports about those bankruptcies suggest, investors may have very few protections in the bankruptcy process when they are seeking to recover some of the money they invested. Within the topic of cryptocurrency and bankruptcy, CNBC recently reported that Core Scientific, which is “one of the largest publicly traded crypto mining companies in the U.S.,” has filed for Chapter 11 bankruptcy. As the CNBC article notes, this recent bankruptcy filing “follows a year of plunging cryptocurrency prices and rising energy prices.” What do you need to know about this bankruptcy filing and its potential implications? Our West Palm Beach bankruptcy lawyers can discuss the case in more detail.
What is a Bitcoin Miner?
In order to understand the implications of the Core Scientific bankruptcy filing in relation to the recent crypto exchange bankruptcies, it is important to understand what is involved in mining cryptocurrency. First, as CNBC explains, Core Scientific “mines for proof-of-work cryptocurrencies,” which includes Bitcoin.
What is involved in this process? According to CNBC, it “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.” It is a process that “requires expensive equipment, some technical know-how, and a lot of electricity.”
Why the Bitcoin Miner Has Experienced Financial Losses
To give you a sense of the money that Core Scientific has lost with the recent cryptocurrency downturn, the company was valued at approximately $4.3 billion when it went public in July 2021. As of mid-December 2022, that valuation had fallen to $78. The company’s stock, according to CNBC, “has fallen more than 98 percent in the last year.” While Core Scientific is still making some money, it is not making enough to pay creditors for equipment and to cover its high energy costs. A couple of months ago, the company indicated that “holders of its common stock could suffer a total loss of their investment” if the cryptocurrency market does not bounce back.
Other crypto-related bankruptcies are part of the reason that the crypto miner has experienced financial losses. Indeed, one of its previous customers was Celsius, a cryptocurrency lender. As you may know, Celsius filed for bankruptcy in July, and Core Scientific was unable to recover much of what it was owed.
Implications of the Bitcoin Miner Bankruptcy
The primary consideration is that the Core Scientific bankruptcy filing is indicative of a further bankruptcy “contagion effect,” as CNBC described it, “rippling across the crypto sector.” Indeed, other crypto miners have filed for bankruptcy in recent months, and others are experiencing financial strain that suggest bankruptcy could occur soon.
As more crypto-related bankruptcy filings occur, others may follow.
Contact a West Palm Beach Bankruptcy Lawyer
If you have any questions about bankruptcy in general, or about bankruptcies involving cryptocurrency, one of our experienced West Palm Beach bankruptcy lawyers at Kelley, Fulton, Kaplan & Eller can assist you.