After several months of disputes between the two now bankrupt companies, Celsius Network has finally accepted that Core Scientific should turn off the 37,000 cryptocurrency mining machines belonging to them but for which it has not paid rent for months.
Agreement reached between Celsius and Core Scientific
It seems that we are nearing the end of a battle that has dragged on for several months. In a document filed on January 3 in the bankruptcy court of Texas, in the United States, Core Scientific has announced that it has reached an agreement with Celsius Network so that “all Celsius mining rigs to be powered down effective January 3, 2023”.
Core Scientific will be responsible for disconnecting and dismantling the mining rigs. The agreement authorizes a Celsius employee to observe operations over a 4-hour window each day. They will have up to 75 days to report any material damage to the machines.
As a reminder, Celsius Network and Core Scientific have filed for bankruptcy in 2022 – respectively on July 13 and December 21 – and are now under the protection of Chapter 11 of US law. But what actually happens between the two companies?
In 2020, Celsius Mining (subsidiary of Celsius Network for cryptocurrency mining) signed an agreement with Core Scientific. In exchange for rent and full coverage of costs (from installation to electricity), Core Scientific undertook to supply, install and maintain the 37,000 Celsius mining machines.
However, since its bankruptcy, Celsius is no longer able to honor its payments. With the recent rise in the price of energy and the fall in the price of Bitcoin (BTC), the bill is salty for Core Scientific.
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2 million dollars of losses per day
Concretely, Core Scientific was forced to go to bankruptcy court to find a solution. Under Chapter 11 of US law, creditors are no longer able to collect debts from bankrupt debtors without going to court.
However, since December 21, Core Scientific has itself been in a state of bankruptcy. Thus, as an emergency measure, the mining company asked the Texas court to reject Celsius Mining’s contracts, justifying that these lead to losses of nearly 30,000 dollars per day in energy and a shortfall of 2 million dollars per month.
In its response, Celsius said it was OK with canceling the contracts and taking back its machines, but disagreed with Core Scientific’s rush to do so. Indeed, the notice of two working days – only – does not allow Celsius to organize properly and society “would have accepted that his devices were simply cut off” time to act.
Excerpt from Celsius Mining and Core Scientific contract
The rest of the debate is currently about the fact that Core Scientific has drastically increased its management fees – and in particular related to electricity – when the contract specifies a fixed and non-variable amount. For the moment, the two entities are sticking to their positions and it will be up to the court to decide.
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