‘Unjustly enriched:’ Core Scientific knocks back $4.7M claim from Celsius

‘Unjustly enriched:’ Core Scientific knocks back .7M claim from Celsius

Bitcoin

Core Scientific has rejected a multi-million-dollar administrative claim from Celsius Network, arguing it's owed an even higher amount from the crypto lender.

Bankrupt Bitcoin (BTC) mining firm Core Scientific has objected to paying a $4.7 million administrative claim put forward by crypto lender Celsius Network, leading to a battle between the firms over contractual obligations.

According to the objection, which was filed in Texas bankruptcy court on May 5, Core Scientific has asked that Celsius Network’s $4.7 million administrative claims be rejected as the firm cannot prove it is entitled to one.

“Celsius’ request for allowance and immediate payment of the Celsius alleged admin claim ignores that Core has substantial claims against Celsius, which Core believes exceed the Celsius alleged admin claim,” wrote the objection.

For context, Core first signed a contract with Celsius in 2020 to host its cryptocurrency holdings in Core’s data centers. However, due to an increase in the price of power, Core passed these additional costs on to Celsius, an allowance that was reportedly stipulated in the original contract.

*Core Scientific’s 2020 contract with Celsius Network. Source:* *Court Filing*.

Despite Celsius initially paying these costs, the crypto lender ceased payments after it filed bankruptcy, Core Scientific claimed in the objection.

“If anyone has been unjustly enriched here, it is Celsius,” wrote Core Scientific in the objection. According to the now-defunct Bitcoin miner, Celsius has been “sitting on almost $8 million of money it owes to Core'' due to a “blatant post-petition violation” of the agreed-upon dispute resolution mechanism.

In total, Celsius now allegedly owes Core Scientific approximately $11 million, a sum that accrues an additional $28,000 in fees and interest with each passing day, the Bitcoin mining firm's lawyers argued.

The conflict between the two firms has been raging since Oct. 19, when Core Scientific first accused Celsius of failing to pay its power bills, citing the non-payments as a significant factor in the liquidity issues that led to the embattled Bitcoin miner filing for Chapter 11 bankruptcy on Dec. 21.

“The millions of dollars Celsius shortchanged Core after Celsius’s bankruptcy filing plus the millions of dollars in litigation…significantly contributed to Core’s liquidity drain and eventual chapter 11 filing.”

On Dec. 28, Core Scientific filed a motion seeking approval to reject Celsius’ contracts, claiming the firm’s failure to pay its power bills constituted a material breach of contract. On Jan. 3 Celsius agreed to let Core Scientific shut down more than 37,000 Bitcoin mining rigs the miner was hosting for the crypto lender.

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BTC miner Core Scientific gets interim nod for .4M bankruptcy loan

Bitcoin mining

The loan would allow Core Scientific to keep its mining and hosting operations afloat while it restructures.

A U.S. bankruptcy court has granted Bitcoin (BTC) miner Core Scientific interim approval to access a $37.5 million loan from existing creditors to fund the firm amid its liquidity issues.

Core Scientific is one of the largest cryptocurrency mining companies in the United States, but filed for Chapter 11 bankruptcy on Dec. 21 as a result of rising energy costs, declining revenue and the price of BTC in 2022.

In a public statement made on that same day, Core Scientific outlined that it intends to “move swiftly through the restructuring process” and maintain its self-mining and hosting operations.

The loan comes from a group of creditors called the Ad Hoc Noteholder Group — which holds more than 50% of Core Scientific’s convertible notes — which agreed to provide debtor-in-possession (DIP) facility commitment loans up to a total of $75 million, according to court filings.

The firm’s application was approved on Dec. 22 and court filings show that the DIP loan will have a 10% per annum interest rate attached.

Core Scientific will be able to access $37.5 million immediately to keep the lights on, while it intends to apply to access the remaining $37.5 million in January as per a Dec. 23 report from Reuters, citing a company attorney.

In the initial DIP budget however, it was forecasted to apply for $12.5 million by Jan. 21.

The Reuters report also suggests the creditors understand the challenges of the bear market and are looking at a long-term play with Core Scientific.

Kris Hansen, a representative of the creditors, told the news outlet that the existing stakeholders “have faith” in the company’s future despite its recent troubles.

In its Q3 financial report, Core Scientific reported having $1.4 billion worth of assets and $1.33 billion worth of liabilities as of Sept. 30, showing a tight balance sheet amid the bull market.

Notably, the firm reports a loss of $434.8 million in Q3 which when added to losses from the previous two quarters, witht total losses reaching $1.71 billion so far this year. As such, the firm indicated in late November that it was most likely heading towards bankruptcy without a fresh injection of cash.

The firm has reportedly mined almost 12,000 BTC this year, marking a significant improvement on the 5,769 BTC mined in 2021, however that of course has not been able to save Core Scientific from its financial woes.

Core Scientific bankruptcy