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Bitcoin miner Core Scientific (CORZ) will shut down mining rigs tied to Celsius Mining, Core's largest client with over 37,000 machines, after a U.S. bankruptcy judge approved the motion to reject its contract.
Both companies are undergoing Chapter 11 bankruptcies: Celsius Mining filed on July 13, 2022, along with its parent company Celsius Network, while Core filed on December 21. The two companies have been in engaged in ongoing litigation over their contract. Core claims that Celsius is not paying its dues, whereas Celsius argues that Core unilaterally increased its power rate, which isn't stipulated in their services agreement.
According to the Jan. 4 court order, all of Celsius' mining rigs were to be powered down effective Jan. 3 and not to be restarted during the transition period. The mining machines are also ordered to be picked up within 75 days of shut down date, with Celsius to pay for the transportation costs.
In a Tuesday hearing, Core's bankruptcy Judge David R. Jones said that the motion to reject doesn't violate the automatic stay on Celsius's property (under U.S. bankruptcy law, once a petition for a Chapter 11 bankruptcy is filed, creditors are no longer able to collect debts from the bankrupt debtor, and Core is likely a Celsius creditor given their dispute over unpaid dues). Jones also called Celsius' objection a "strategic" maneuver in which Celsius is trying to "take advantage" of the judge in its own bankruptcy case, without that judge being able to voice his concerns.
On Dec. 28, 2022, Core Scientific asked the Southern District of Texas bankruptcy court to reject Celsius Mining's contracts as an emergency measure, with the hosting firm claiming it is losing about $2 million in incremental revenue a month. If Core Scientific were released from the obligation to host Celsius Mining's machines, the company said it could generate $2 million per month either by finding other clients or by using the space for its own machines, the firm said in the motion.
Core Scientific asked for a hearing on Jan. 3, citing the urgency of the matter, which it says is leading it to lose $28,840 per day in power costs.
Celsius, in its response, said it agrees with cancelling the contracts and taking its machines back, but disagreed with Core Scientific's hastiness to do so. "This purported 'emergency' is entirely of Core’s own making and does not warrant a hearing on just two business days’ notice," Celsius Mining said in its Jan. 2 response to the motion. Celsius will have to consult with its own lenders before it can fully respond to Core's request, which it says it can't do in two business days. Celsius thus wanted to move the hearing to Jan. 23.