SEC Raises Objections to Celsius Network’s Restructuring Plan Involving Coinbase

Key Takeaways

SEC files limited objection against Celsius Network’s restructuring plan.

Concerns raised over the company’s proposed engagement with Coinbase.

SEC’s ongoing lawsuit against Coinbase cited as complicating factor.

Next bankruptcy court hearing scheduled for October 5, 2023.

Background and Timeline

Celsius Network filed for Chapter 11 bankruptcy after announcing a $14 million agreement with Core Scientific, a mining company. Since filing for bankruptcy in July 2022, Celsius has reportedly failed to meet its payment obligations to Core Scientific. The restructuring plan has undergone several amendments since its initial filing in March 2023, with the fourth iteration submitted in August 2023. The bankruptcy court has yet to approve the plan, and the next hearing is scheduled for October 5, 2023.

SEC’s Concerns

The SEC’s limited objection focuses on Celsius Network’s proposed engagement with Coinbase, which is intended to act as a Distribution Agent for international customers under the restructuring plan. The SEC argues that the role of Coinbase in the arrangement “goes far beyond the services of a distribution agent,” potentially implicating brokerage and master trading services. These services are central to the SEC’s ongoing lawsuit against Coinbase, initiated in June 2023. The SEC has reserved the right to object further based on the outcome of this and other related cases.

Coinbase’s Response

Coinbase CEO Brian Armstrong and Chief Legal Officer Paul Grewal took to social media to express their support for Celsius Network. They questioned why the SEC would object to a “trusted US public company” taking on the role of distributing assets back to Celsius customers. The statement raises questions about the SEC’s motives and adds another dimension to the ongoing legal complexities.

Implications and Next Steps

The SEC’s objection could potentially delay or alter the terms of Celsius Network’s restructuring plan. It also raises questions about the regulatory landscape for crypto companies engaging with traditional financial institutions. The bankruptcy proceeding is set to continue, with the next hearing scheduled for October 5, 2023. The SEC reserves the right to object further based on the outcome of this and other related cases.

Disclaimer & Copyright Notice: The content of this article is for informational purposes only and is not intended as financial advice. Always consult with a professional before making any financial decisions. This material is the exclusive property of Blockchain.News. Unauthorized use, duplication, or distribution without express permission is prohibited. Proper credit and direction to the original content are required for any permitted use.

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Bitmain Commits $54 Million Investment in Core Scientific, Inc. Amid New Supply Contract

At the World Digital Mining Summit, Core Scientific, Inc. (OTC: CORZQ), a North American leader in blockchain computing data centers and software solutions, disclosed a significant investment from Bitmain, the globally recognized manufacturer of digital currency mining servers. Bitmain’s commitment amounts to $53.9 million, further cementing the bond between the two industry giants.

This collaboration will see Bitmain furnishing Core Scientific with 27,000 of its latest Bitmain S19J XP 151 TH bitcoin mining servers. The transaction involves a $23.1 million cash payment and an equity exchange worth $53.9 million in Core Scientific common stock. The equity’s per-share value will be finalized following a chapter 11 plan of reorganization, anticipated to gain approval in the upcoming fourth quarter.

Max Hua, Bitmain’s CEO, expressed his optimism about the strengthened ties with Core Scientific, praising their “professionalism, integrity, and commitment” to the Bitcoin Network’s growth. He emphasized the shared vision of both companies in fostering the expansion of the Bitcoin Network, especially as global bitcoin adoption surges.

Core Scientific’s history with Bitmain is deep-rooted. Since its inception in 2017, Core Scientific has managed over 600,000 Bitmain miners across its data centers. Presently, a staggering 99% of the 200,000 miners they operate, both owned and hosted, are Bitmain S19 models. Bitmain has also been a loyal hosting customer for nearly half a decade, entrusting Core Scientific with a significant portion of its mining equipment.

Adam Sullivan, CEO of Core Scientific, acknowledged the pivotal role Bitmain plays in their operations, stating, “Bitmain’s product quality, attention to service, and responsiveness are critical to our success.” He further highlighted the anticipated efficiency boost the new miners would bring, especially in light of the upcoming halving event.

By the close of 2023’s fourth quarter, Core Scientific aims to integrate and activate the 27,000 units, potentially adding 4.1 exahashes to its self-mining hash rate. Additionally, both parties have consented to upgrade older Bitmain miners at Core Scientific’s facilities to the newer S19J XP models, promising an even greater hash rate increment.

As of the end of August 2023, Core Scientific boasted an impressive energized hash rate of 22.0 exahashes per second, spread across its data centers in five U.S. states. Their self-mining operations yielded 965 bitcoins in August alone, with a cumulative 9,755 bitcoins mined year-to-date, surpassing any other publicly listed bitcoin miner in North America.

Disclaimer & Copyright Notice: The content of this article is for informational purposes only and is not intended as financial advice. Always consult with a professional before making any financial decisions. This material is the exclusive property of Blockchain.News. Unauthorized use, duplication, or distribution without express permission is prohibited. Proper credit and direction to the original content are required for any permitted use.

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Core Scientific and Celsius Mining Settle Litigation with Texas Data Center Purchase Agreement

Core Scientific, Inc. (OTC: CORZQ), a prominent player in blockchain computing data centers and software solutions, has entered into an agreement with Celsius Mining LLC, a Bitcoin mining subsidiary of Celsius Network. The deal involves the sale of Core Scientific’s Ward County, Texas, Bitcoin mining data center site, known as “Cedarvale,” to Celsius. The two companies have also agreed to settle all ongoing litigation for a total cash consideration of $14 million.

The Cedarvale site, which is currently under development and non-operational, boasts 215 megawatts of available power. The site also includes buildings under construction, equipment, and designs essential for the facility’s completion. If the agreement receives approval, it will lead to a settlement and mutual release concerning all existing litigation between the two entities.

Adam Sullivan, CEO of Core Scientific, remarked, “We are pleased to resolve all existing litigation related to Celsius Mining.” He further emphasized the company’s dedication to enhancing its operational excellence and its plans to expand its Texas data centers.

The acquisition of the Cedarvale site is a strategic move for Celsius, setting the stage for its collaboration with Fahrenheit LLC, its previously announced Plan Sponsor. Chris Ferraro, Chief Restructuring Officer and Interim CEO of Celsius Network, stated that securing the Cedarvale site “further increases Celsius’ commitment to West Texas,” expanding their self-mining portfolio to 300 megawatts.

U.S. Data Mining Group, Inc., also known as US Bitcoin Corp (USBTC), will oversee the construction of the Cedarvale facility. USBTC, which was chosen to manage and operate Celsius’s mining assets, has also been engaged by Celsius to scale and optimize its mining business.

Asher Genoot, President and Co-Founder of USBTC, expressed satisfaction with the transaction, emphasizing its significance for NewCo’s mining division and the potential value it brings to the Celsius estate.

It’s worth noting that this transaction does not impact Core Scientific’s mining fleet. The Cedarvale site, valued mutually at $45 million, is not part of Core Scientific’s three-year roadmap, which was made public in June 2023. As of August 31, 2023, Core Scientific operated approximately 206,000 Bitcoin miners, producing 965 Bitcoin in July and 9,756 Bitcoin year-to-date, surpassing any other listed Bitcoin miner in North America.

Both Core Scientific and Celsius have filed for Chapter 11 restructuring, making the proposed agreement subject to approval in both Bankruptcy Court jurisdictions.

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Bitcoin Miner Core Scientific Apparently Declares Chapter 11 Bankruptcy

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According to reports, Core Scientific has submitted a petition for protection under Chapter 11 of the U.S. bankruptcy code in the state of Texas due to declining revenues and prices of bitcoin.

Only a few days after creditors attempted to help Core Scientific, a Bitcoin mining company, escape probable bankruptcy, news emerged confirming the company’s impending demise.

To preserve the value for the company’s stakeholders, the financial services platform B. Riley made an offer to finance Core Scientific in the amount of $72 million on December 14; of this amount, $42 million would be provided with no conditions attached, and the remaining $32 million would be subject to certain requirements.

The decision was reached after the valuation of Core dropped from $4.3 billion in July 2021 to $78 million at the time the report was made.

Core Scientific was forced to liquidate 9,618 Bitcoin in April in order to continue business as usual. This was a direct consequence of a protracted bear market.

The Bitcoin mining firm will reportedly file for Chapter 11 bankruptcy on December 21, 2022, based on a report by CNBC, which cited a person familiar with the company’s finances as its source.

Even while the firm is still producing positive cashflows, the money is not sufficient to cover the operational expenditures, which include paying back the lease for the Bitcoin mining equipment.

As stated in the article, Core Scientific does not appear to have any intention of winding down its mining activities and will apparently carry them out as usual.

During the time that creditors were willing to extend a helping hand, the company’s shares saw a momentary increase of about 200%, which has since been followed by a consistent decrease.

The United States Securities and Exchange Commission received a filing from Core Scientific on October 26 that suggested the company was in a precarious financial position.

According to the firm, the key causes for this predicament were low Bitcoin prices, rising power expenses, a rise in the worldwide Bitcoin hash rate, and a bankruptcy filing by crypto lender Celsius that wiped off the obligations owing to Core Scientific.

As an effort to improve the reliability of its cloud services, the multinational technology company Microsoft recently implemented a restriction that prevented its cloud customers from mining cryptocurrency.


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Core Scientific’s future is under “substantial doubt”

The bitcoin miner Core Scientific has voiced “substantial doubt” that they would be able to continue their activities over the course of the next year given the present status of the company’s finances. 

The corporation disclosed to the United States Securities and Exchange Commission (SEC) on November 22 that it had incurred a net loss of $434.8 million during the third quarter of 2022. This information was included in the quarterly report that the company had filed with the SEC.

After reporting a net loss of $862 million for the second quarter of the year 2022, the total amount of the company’s net losses for the year currently stands at $1.71 billion.

According to the statements made by the company, more liquid resources will be required for it to be able to continue doing business until the month of November 2023. The statement predicted that the company’s financial resources “will be depleted by the of 2022 or sooner. “

It stated that it had doubts about its ability to raise funds through financing or capital markets, citing “uncertainties and current market conditions” which have reduced the availability of those kinds of liquidity sources. It stated that it had doubts about its ability to raise funds through financing or capital markets. Additionally, it indicated that it had concerns about its capacity to generate capital via private placements of its securities.

It was also noted as one of the reasons why it is facing a liquidity pressure, along with the declining price of Bitcoin and an increasing hash rate. These are the three main reasons why it is now undergoing a liquidity squeeze. In addition, it was mentioned that further “substantial doubt exists” regarding its capacity to continue operating because it is “very difficult to predict when or if Bitcoin prices will recover or energy costs will abate.” This is because it is “very difficult to predict when or if Bitcoin prices will recover or energy costs will abate.”

Core Scientific had previously indicated in a filing made with the SEC on October 26 that a combination of factors, such as a low Bitcoin price, rising electricity costs, and a refusal from bankrupt crypto lender Celsius to repay a $2.1 million loan, could result in Core Scientific’s cash resources being depleted. The filing was made because Core Scientific had previously indicated that this could happen “depleted before the end of the year 2022, if not sooner if possible.

In addition to this, it has decided to cease paying payments to some of the businesses that it has borrowed money from in the past. As a direct result of making this choice, the company warns that it runs the risk of being sued for nonpayment and experiencing a rise in the interest rate.

Argo Blockchain is attempting to raise additional liquidity by way of subscription for ordinary shares, and the company has warned that it, like Core Scientific, is at risk of ceasing operations if it is unable to do so. Argo Blockchain is attempting to raise additional liquidity by way of subscription for ordinary shares. Mining bitcoin is difficult in the present market, and Core Scientific is not the only firm that is having problems maintaining its operations in this environment. Argo Blockchain is an example of.

Iris Energy, a mining business based in Australia, is likewise showing signs that it is having difficulty meeting its financial obligations. On November 21, the business informed the SEC in a statement that it had turned off some hardware owing to the fact that the units were not producing sufficient income “a cash flow that is insufficient for the situation.

state of Bitcoin mining, and said in a tweet dated November 22 that this type of response is to be expected anytime the price of Bitcoin is lower than the cost to mine. The tweet noted that this kind of reaction is to be anticipated whenever the price of Bitcoin is lower than the cost to mine.


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Financially Distressed Core Scientific Owes $1 Billion To Creditors

Core Scientific, a major publicly traded crypto mining company in the U.S., on Friday raised the possibility of bankruptcy in a statement filed with the SEC (Securities and Exchange Commission). Blockchain.News reported the matter.

The Bitcoin miner sent a warning of its inability to pay down its creditors after saying it may have to apply for bankruptcy protection if it fails to improve its financial condition.

Core Scientific said it anticipates existing cash finances will be depleted by the end of the year or possibly sooner. The firm further revealed that it will not make its debt payments coming due in late October and early November.

Core Scientific admitted that it might be sued as a result of missed payments. The company stated in the filing that its creditors are therefore free to sue the firm for nonpayment, take action with respect to collateral and opt to accelerate the principal amount of such debts.

The latest report shows that Core Scientific owes about $1 billion to a series of companies including crypto lender BlockFi, investment banking firm B. Riley, crypto financial services firm NYDIG, Anchor Labs, the parent company of digital asset bank Anchorage Digital, and Barings LLC, an international investment management firm owned by MassMutual.

The largest loans and promissory notes taken out by the Bitcoin miner from B. Riley, MassMutual Barings, and BlockFi, were $75 million, $65.6 million, and $60.7 million, respectively, as of June 30.

Core Scientific took a huge amount of loans to finance its hardware and infrastructure improvements, beginning in the second half of 2021, when Bitcoin prices were on the rise (reaching a peak of nearly $70,000 in November) and when miners were racing to grow their operations amid the recent market downturn that started early this year.

Core Scientific said its operating performance and liquidity have been severely affected by the prolonged decrease in Bitcoin price, the increase in electricity costs, as well as the increase in the global Bitcoin network hash rate as more miners are competing for the reward.

In the filing, Core Scientific also blamed default payments by Celsius Networks LLC for its financial struggles. Despite selling most of its Bitcoin in June, the firm is down to $26.6 million in cash.

Core Scientific is not the only struggling firm in the mining sector. In September, Compute North, one of the largest operators of crypto-mining data centers, filed for Chapter 11 bankruptcy and said its CEO stepped down as the fall in crypto prices continues raging the industry. Early this month, Marathon Digital Holdings, disclosed an $80 million exposure to the bankrupt mining firm.

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Core Scientific Faces Bankruptcy With Over 78% collapse in Share Value

Prominent Bitcoin (BTC) mining firm Core Scientific has revealed in a court filing that it is contemplating bankruptcy as a possible solution since it is unlikely to be unable to pay its debts shortly due to a lack of cash flow.


Consequently, the share price of the bitcoin miner drastically dropped in the hours after this disclosure.

Following the time of writing this report, the firm’s reserves had dropped from $1.01, where it stopped trading earlier this week to $0.22, a steep decline of more than 78%.

According to the Board’s decision, the company will not make payments due in late October and early November 2022 for a number of its assets and other financing transactions, together with its two bridge promissory notes. 

The court filing with the United States Securities and Exchange Commission (SEC) asserted that because of this outcome, the creditors under these debt facilities may exercise remedial measures following any applicable grace periods, such as choosing to speed up the principal amount of such debt, suing the Company for failing to pay, or looking to take action about collateral, where applicable.

Core Scientific Set to Declare Bankruptcy

Following the financial crisis, the company is evaluating available measures with the help of a few legal experts, as well as deploying strategic counsel, participating in liability management transactions, raising extra funds, or even changing its current capital structure.

Notably, the firm’s last option, specifically to protect itself from creditors’ litigation, is to declare bankruptcy if these alternative measures fail. Recall that this year, quite a number of enterprises have filed for bankruptcy in the cryptocurrency space as a result of the bear market. 

For instance, Thailand Security and Exchange Commission banned crypto-staking lender services after Zipmex filed for bankruptcy back in September. Additionally, major crypto lender Celsius filed for bankruptcy in July. 

Core Scientific found itself in this situation as a result of the market’s continued decline, among other factors that have driven down the estimated value of bitcoin and in addition to its legal actions against the insolvent Celsius Network

Before this, Core Scientific had already been producing a lot of BTC during the year. With nothing but a median price of about $23,000 per Bitcoin sold back in June, which resulted in the firm selling 7,202 units.

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Core Scientific Records $862m Loss in Q2, follows by 10 % Workforce Laid off

Core Scientific, a large publicly traded cryptocurrency mining company in North America, announced its second quarter 2022 update and said it was laying off 10% of its workforce as it reported an $862 million quarterly loss due to impairments such as goodwill and digital assets.

The loss was primarily attributed to an $840 million impairment of goodwill, a $150.2 million impairment of digital assets, a $106.9 million increase in total operating expenses, and a $13.1 million loss on exchange or disposal of property, plant, and equipment.

Chief Financial Officer Denise Sterling said on the earnings call that the layoffs will not affect Core Scientific’s data centre operations staff.

In the second quarter, the company mined 3,365 bitcoins and had 1,959 bitcoins in reserves at the end of the quarter.

Core Scientific Sold 1,975 Bitcoins, more than it mined in July, to recover spending on the company’s costs.

On its balance sheet, revenue in the second quarter was $164 million, an increase of more than 115% from the previous year. The revenue growth benefited from the growth of digital asset mining revenue and custody revenue.

The company’s escrow revenue generated $38.9 million due to onboarding new clients and executing new affiliate escrow contracts for deployed miners.

During July, the company signed hosting agreements with customers for a total of 75MW. As of July 31, 2022, Core Scientific provides data centre hosting services and technical and operational support for approximately 86,000 customer-owned ASIC servers.

Core Scientific said thanks to an increase in self-mining hash rate, from 0.45 EH/s to 10.3 EH/s, digital asset mining revenue was $109.8 million, an increase of $99.1 million from the previous $10.8 million, an increase of 920% up to $99.1 million.

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Core Scientific Sold 1,975 Bitcoins More That It Mined in July

Core Scientific, a major publicly traded cryptocurrency mining firm in North America, on Friday, announced its production and operational updates for July 2022.

During the month of July, the firm mined 1,221 Bitcoins, as compared to 1,106 BTCs mined in June. The company also expanded its fleet of self-mining servers by 6% to 109,000 in July from approximately 103,000 in June.

Bitcoin production benefited from the deployment of approximately 6,000 net new servers during the month, the firm said.

Grid Support

In the month of July, the company completely powered down its Texas data center operations on several occasions to support the Texas grid operator during periods of extremely high temperatures.

While Core Scientific admitted that the curtailment activities limited its production advances during the period, it said it works with the communities and utility companies in which it operates to enable and ensure electrical grid stability.

Colocation Services

As of July 31, 2022, Core Scientific provided data center colocation services, technology and operating support for around 86,000 customer-owned ASIC servers, a net monthly increase of about 10% from approximately 78,181 customer-owned ASIC servers in June.

During July, the firm signed colocation agreements with customers totaling 75MW, which represent approximately $50 million in annual revenue when fully deployed.

On July 19, Core Scientific deployed the first Bitmain Antminer S19 XP servers in the US for its customer, NFN8 Group, Inc. The S19 XP servers were rated to operate at up to 140 TH/s and represent the first of many planned for deployment by the company for self-mining and colocation customers.

As of the end of July, Core Scientific said its colocation services accounted for approximately 44% of the company’s total hashrate. The firm further stated that inquiries for colocation services continue to exceed the company’s available infrastructure.

Mike Levitt, Core Scientific Chief Executive Officer, talked about the development: “We deployed 14,000 new ASIC servers in July. These deployments increased our total hashrate to approximately 19.3 EH/s, representing the largest operating capacity of any listed company in North America. In addition, we signed new colocation agreements with customers that should, once the servers are deployed later this year, generate approximately $50 million in annual revenue. During the month of July, we continued to enhance liquidity, strengthen our balance sheet, streamline our organization and make further progress toward achieving our 2022 operating objectives.”

Data Centers

As of month-end, Core Scientific said it operated approximately 195,000 ASIC servers, representing 19.3 EH/s, in its data centers.

The firm owns data centers in Georgia, Kentucky, North Carolina, and North Dakota, which continue to operate as expected. The company said it has multiple operational facilities in Texas, with significant future development planned for Texas and Oklahoma within this year.

Bitcoin Sales

During the month of July, Core Scientific said it sold 1,975 Bitcoins at an average price of around $22,000 per Bitcoin for total proceeds of approximately $44 million. As of July 31, 2022, the firm held 1,205 Bitcoins and approximately $83 million in cash on its balance sheet.

The company mentioned that it used the proceeds from Bitcoin sales in July to pay for capital investments related to expanding data center capacity as well as payments due to Bitmain for the 100,000 ASIC servers order placed in 2021.

Core Scientific said so far it has paid a huge chunk of the Bitmain loan, as currently less than $10 million in ASIC server loan payments is what remains to be cleared off.

The firm stated that it will continue to sell self-mined Bitcoins to pay operating expenses, retire debts, maintain liquidity, and fund growth.

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Bitcoin Miner Core Scientific Secures $100m Financing amid Bear Market

Core Scientific, a publicly traded Bitcoin mining firm based in the US, announced Thursday that it has entered into a common stock purchase agreement for up to $100 million with B. Riley investment bank.

Core Scientific plans to use the net proceeds to boost its balance sheet and help the firm expand its crypto mining operations.

Under the terms of the agreement, Core Scientific has the right in its sole discretion, but not the obligation, to issue and sell to B. Riley up to $100 million worth of shares of its common stock from time to time over the approximately 24-month term of the purchase agreement.

Core Scientific dominates the timing and amount of any sales of its shares of common stock, and B. Riley is obligated to make purchases, subject to certain limitations and satisfaction of certain conditions set in the agreement.

The mining firm has issued 573,381 shares of its common stock to B. Riley as consideration for the bank’s commitment to purchase Core Scientific common stock.

Mike Levitt, Core Scientific Chief Executive Officer, talked about the development: “Securing access to additional capital during adverse market conditions enhances our liquidity and expands our strategic optionality. We continue to strengthen our balance sheet and streamline our operations as we remain focused on expanding our capacity for self-mining and colocation services. This Committed Equity Facility with B. Riley is an important additional funding source that will help us grow and create shareholder value.”

Strengthening Balance Sheet in Challenging Environment

The move by Core Scientific comes as the ongoing bear market has impacted mining profitability as well as operations of public Bitcoin miners. Most of these miners have been forced to sell off their BTC reserves as crypto winter continues to ravage.

Last month, Toronto-based Bitfarms sold 1,500 Bitcoins—almost half its supply—to reduce debt. Early this month, Core Scientific sold 7,202 Bitcoins at an average price of $23,000 to raise about $167 million. The company planned to use the proceeds for debt repayments, capital investments in additional data-centre capacity, and payments toward ASIC servers.

Such strategic changes enable these firms to focus on their key priorities of maintaining their operations and continuing to grow their business in anticipation that mining economics will improve.

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