Core Scientific Shuts Down Celsius Network’s Mining Rigs 

Core Scientific Shuts Down Celsius Network’s Mining Rigs 

The company responsible for 10% of the world’s Bitcoin mining hashrate has terminated its contract with Celsius Mining, the bitcoin mining arm of ex-crypto lender Celsius Network. In its defence, Core Scientific argues that Celsius is long overdue on its payments which led to the firm facing a liquidity crisis. 

Core Scientific, the world’s largest Bitcoin (BTC) miner by computational power, is shutting down 37,000 mining rigs that it was hosting for Celsius Mining, the crypto mining arm of now bankrupt lender Celsius Network. Both companies that are currently undergoing Chapter 11 procedures have been locking horns blaming the other for violating terms of agreement

The bitcoin miner (Core Scientific) accused its largest client (Celsius) of not paying electricity dues, which resulted in the company facing a liquidity crisis and later led to its bankruptcy. Meanwhile, Celsius Mining argues that the hosting firm increased its power rate, which was not mentioned in their services agreement. Celsius’ mining division filed for Chapter 11 alongside its parent company on July 12, 2022, while Core Scientific filed for bankruptcy on December 21, 2022. 

Core Scientific Shuts Down Celsius Network’s Mining Rigs 

On December 28, Core Scientific filed a motion in the U.S Bankruptcy Court for the Southern District of Texas to terminate Celsius Mining’s contract, claiming that the company’s failure to pay its dues was costing Core $2 million ($28,840 per day) in revenue that would otherwise be generated if the space was leased to another party or used by its own machines.

According to the deal, Core was allowed to pass some of its power to Celsius to cover electricity costs. However, since the war between Ukraine and Russia broke out, energy prices have increased all over the world. In its rejection motion, Core claims that covering increased charges has cost the company an extra $7.8 million, and that it “cannot afford to continue shouldering the burden of Celsius’ unpaid power costs.”

Celsius agreed to cancel its contract and take back its machines, which are now the property of the U.S Bankruptcy Court for the Southern District of New York where Celsius’ case is being heard. However, the miner criticised Core Scientific’s urgency to do so. Celsius argued that a hearing scheduled for January 3 was too soon and it will have to consult with its own lenders to fully respond to Core’s request, which was not possible in just two business days. The bankruptcy crypto lender wanted to move the hearing to January 23. On Tuesday, Core Scientific filed a revised court order stating that all rigs under Celsius will be shut down and will not be powered back up during its restructuring period. 

In the hearing held on January 3, Chris Koenig, attorney representing Celsius in the hearing, said that the company has agreed with Core Scientific to turn off its machines, and that the miner wont charge Celsius for its hosting services here onwards. Texas bankruptcy court Judge, David Jones, has given attorneys representing both companies some time to reach an agreement on the transition plan. 

Not only is Celsius the largest customer of Core Scientific, but also one of its largest secured noteholders, holding about $54 million or 10% of the $544 million secured convertible notes that were issued by the bitcoin miner. Citing ongoing litigations against Core Scientific, Celsius argues that apart from increasing its hosting fee, the company also blocked it from joining the committee of secured noteholders who have been in discussions with Core to restructure its debt. 

The crypto winter has led to the price of Bitcoin dropping 75% below its all-time high of $69,000 this year. Additionally, the rising cost of production has led to hash prices – the revenue earned by miners per every unit of hashrate, computing power used when mining BTC – falling 75% in 2022, leading to many bitcoin mining companies filing for bankruptcy. Riot Blockchain, Core Scientific and Iris Energy are some of the prominent miners who are progressing with their Chapter 11 financial restructuring procedures. 

Earlier this week, investment giant and Core Scientific’s largest shareholder, BlackRock, provided a $17 million loan to help the company continue operations. The deal was part of an agreement made between Core and its creditors before its bankruptcy to issue a $75 million loan on its secured convertible note. In its bankruptcy hearing held last month, Celsius claimed that its Bitcoin mining operations have returned profits every month of 2022. 

At the time of writing, BTC is trading at $16,844 – up by 0.7% in the last 24-hours. 

Also Check: Cryptosat Launches Second Satellite Into Space On Falcon 9 Rocket

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