U.S.-based Bitcoin mining company Core Scientific has filed for Chapter 11 bankruptcy protection in Texas today due to a severe decline in Bitcoin USD value stemming from the ongoing market crisis, CNBC reported Wednesday, citing people familiar with the matter.
Core Scientific Secures Funds to Avoid Bankruptcy
The Bitcoin-focused firm hinted in October that it might consider bankruptcy after incurring a $1.7 billion loss in the first nine months of the year, according to a quarterly report filed with the United States Securities and Exchange Commission (SEC).
The SEC’s report also showed that Core Scientific owes its institutional creditors, including the bankrupt crypto lender BlockFi, investment banking firm B. Riley, and crypto financial services firm NYDIG, around $1 billion, while it had only $32 million in cash and 62 bitcoins.
Last week, the company received $72 million in financing from one of its creditors, B. Riley, to avoid bankruptcy.
The investment bank disclosed that most of the company’s financial crisis is self-imposed and could be remedied with an open and transparent discussion with its investors and creditors.
“Bankruptcy is not necessary at all for the company and the vast majority of Core Scientific’s issues are self-imposed and can be corrected with an open, transparent discussion and ongoing participation with its lenders and investors,” B Riley said.
The news of the financial assistance saw the company’s stock trade in green from a low of $0.15 to a high of $0.46. Despite the funds, Core Scientific filed for bankruptcy today, citing an increasing drop in bitcoin prices, the rise in energy prices, and the high cost of mining equipment.
According to CNBC, the Bitcoin mining firm, which went public earlier last year through a special purpose acquisition (SPAC), plans to remain fully operational. At the same time, it works to improve its financial conditions.
Core Scientific wants to reach a deal with its senior security noteholders, which hold a chunk of the company’s debt, to allow it to operate while seeking the best restructuring strategies to regain its strength.
In its October filing with the SEC, the crypto mining firm said that “holders of its common stock could suffer a total loss of their investments, but that may not be the case if the overall industry recovers.”
