Crypto miner Core Scientific files for bankruptcy as industry contagion bites

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Core Scientific Inc, one of the biggest publicly traded cryptocurrency mining companies in the United States, said on Wednesday it filed for Chapter 11 bankruptcy protection, the latest in a string of failures to hit the sector.

Trillions in value has been wiped out from the crypto sector this year on rising interest rates and exacerbating worries of an economic downturn. The slump has eliminated key industry players such as Three Arrows Capital and Celsius Network.

The bigger blow came after major crypto exchange FTX filed for bankruptcy protection last month. Its swift fall has also sparked tough regulatory scrutiny of how crypto firms hold funds and conduct business operations.

After rapid growth in 2020 and 2021, bitcoin – the most popular digital currency by far – is down more than 60% this year.

Austin, Texas-based Core Scientific said it would not liquidate and would continue to operate normally, as it expects to enter into a restructuring support agreement with its creditors, who represent over 50% of the holders of its convertible notes.

The company's shares, which have lost roughly 98% of their value so far in 2022, fell another 14% in premarket trading.

In a statement on Wednesday, Core Scientific said its creditors have also agreed to provide up to $56 million in debtor-in-possession financing.

One of the largest creditors of Core Scientific, B. Riley Financial Inc, had offered $72 million last week to avoid the bitcoin miner's bankruptcy.

In its bankruptcy petition, Core Scientific said it has $1 billion to $10 billion in assets and liabilities, and creditors between 1,000 and 5,000.

Core Scientific went public through a merger with a blank-check company in a deal that valued the miner at $4.3 billion.

Bitcoin miners have been under severe pressure as their profitability dropped amid a slump in cryptocurrency prices and soaring energy rates.

Core Scientific was also impacted by litigation with Celsius Networks LLC and its affiliates.