of crypto mining is experiencing one of its toughest times since the start of the week, with actors bowing out one after the other.
Crypto Mining, An Activity That Leads To Bankruptcy?
The situation is not improving on the crypto mining side. While farm yield unsatisfactory with all the support of companies such as Binance, the inevitable seems to happen. As many farms feared, the financial and energy difficulties surrounding the market are forcing the most unfortunate to bend out.
One of the largest crypto mining companies, Core Scientific, has filed a bankruptcy notice with the SEC. The latter, already loaded with debts, did not find the means to pay them off during the fall as planned. Less cash and despite the sale of its shares, the operations management team expects to cease operations before the end of the year.
It is very difficult to estimate our future needs cash. The company expects existing cash resources to be depleted by the end of 2022 or earlier. Based on the Company’s assumptions regarding the timing and ability to achieve more normalized levels of revenue, estimates of the amounts of cash requirements vary considerably. Likewise, it is very difficult to predict when or if Bitcoin prices will recover or energy costs will fall.
Excerpt from bankruptcy filing filed by Core Scientific
In the same scheme, the company Iris Energy also announced that it cannot meet the debts within the deadline, which had already been postponed by two weeks. The company had indeed launched a mutual fund in order to be able to finance its crypto mining activity. Unfortunately, the operation is not profitable enough to allow the said fund to be reimbursed.
Some equipment (ie bitcoin miners) owned by special purpose entities are currently producing insufficient cash flow to meet their respective debt financing obligations and have a current market value well below the principal amount of the corresponding loans. Restructuring discussions with the lender are still ongoing.
Excerpt from communicate published by Iris Energy
However, for Iris Energy, bankruptcy is not yet a reality. Through various financial deals, including the sale of old mining equipment, the company hopes to generate enough funds to bail out its debt.
Meanwhile, Compute North is causing a stir
While some are struggling to combat the hole in their cash flow, others are already showing signs of poor management. Compute North, which officially went bankrupt on September 22, is now subject to a scandal reminiscent of Celsius Network or Three Arrows Capital. Through the court filing, the crypto mining company has effectively frozen the repayment of around $500 million owed to its creditors.
According to one court document issued by the Southern District Court of Texas, Compute North allegedly paid nearly 3 million dollars to its employees on the day of bankruptcy, instead of using them for said repayments. The former operations CEO, who had resigned a few days earlier, was to have received $600,000 in bonuses.
At the moment, the managers concerned have not expressed their positions on the payment of these benefits. The case, however, could prove fatal for other exposed farms such as Marathon and generate a domino effect as we saw in crypto winter.
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