Core Scientific Reportedly Filed for Chapter 11 Bankruptcy

Core Scientific Reportedly Filed for Chapter 11 Bankruptcy

Despite filing for bankruptcy, the company is not planning to liquidate and will continue to operate as usual.

Core Scientific, one of the largest Bitcoin (BTC) mining firms in the United States, established in 2017, has reportedly filed for Chapter 11 bankruptcy protection in Texas.

According to the news report shared by CNBC, the news was revealed by a person familiar with the company’s finances.

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The company is not planning to liquidate. The person familiar with the matter stated that Core Scientific will continue to operate as usual while “reaching a deal with senior security noteholders.”

Core Scientific is reportedly generating a positive cash flow however it is not enough to cover the company's operational expenses. The company is struggling to obtain the funds needed to repay the lease for its mining equipment.

A week before filing for bankruptcy, Core Scientific received financial assistance proposal from financial service platform B. Riley. The company offered Bitcoin (BTC) mining firm $72 million “in new, non-cash pay financing on favourable terms, providing more than two years of runway for the company to achieve profitability.”

At that time, B. Riley stated that the company can provide the funding of $40 million immediately with "zero contingencies." Regarding the matter, B. Riley noted:

In our opinion, the vast majority of Core Scientific's issues are self-imposed and can be corrected in conjunction with an open, transparent discussion and ongoing participation with its creditors and equity holders.

It is worth noting that in April, the company was forced to sell 9,618 BTC, worth around $400 million, taking into account an average Bitcoin price in April 2022, to remain operating. Nevertheless, on October 26th, it informed the US SEC about its financial troubles.

At that time, the company highlighted that it experienced financial issues due to increased electricity costs, low Bitcoin prices, increased BTC hash rate and Celsius bankruptcy filing.

Core Scientific’s value was dropping together with Bitcoin prices. In July 2021, Core was valued at $4.3 billion, whereas in December 2022, it was valued at $78 million.

Gile K. - Crypto Analyst

by Gile K. - Crypto Analyst, BitDegree