A legal dispute has emerged between bankrupt Bitcoin (BTC) mining company Core Scientific and crypto lender Celsius Network over contractual obligations. Core Scientific has objected to paying a $4.7 million administrative claim made by Celsius Network, prompting the latter to seek proof of its entitlement.
Core Scientific drags Celsius before a court in Texas
The two firms had entered into a contract in 2020 whereby Core would host Celsius’s cryptocurrency holdings in its data centers. However, an increase in the price of power led to Core passing on additional costs to Celsius, which the latter reportedly accepted. But Celsius stopped payments after filing for bankruptcy, according to Core.
The objection claims that Celsius owes Core Scientific $8 million due to a “blatant post-petition violation” of a dispute resolution mechanism. The Bitcoin mining company’s lawyers say the total amount owed is now approximately $11 million, with interest and fees accumulating daily.
Core Scientific accused Celsius of failing to pay its power bills on Oct. 19 last year, citing the non-payments as a significant factor in liquidity issues that contributed to its Chapter 11 bankruptcy filing on Dec. 21.
According to Core Scientific, “the millions of dollars Celsius shortchanged Core…plus the millions of dollars in litigation…significantly contributed to Core’s liquidity drain and eventual chapter 11 filing.”
The firm says Celsius owes $11 million
On Dec. 28, the Bitcoin miner filed a motion requesting permission to reject Celsius’ contracts, claiming that the failure to pay constituted a material breach of contract. Celsius subsequently agreed to allow Core Scientific to shut down more than 37,000 Bitcoin mining rigs that it had been hosting for the crypto lender.
The current legal tussle underscores the difficulties faced by cryptocurrency miners who have struggled with profitability due to rising energy costs and volatile prices. While the price of Bitcoin has experienced some recovery in recent weeks, miners continue to face significant challenges.
The collapse of Core Scientific highlights the risks inherent in the industry, with even relatively large players falling prey to liquidity issues. The outcome of the legal dispute between Core Scientific and Celsius Network could have significant implications for the wider cryptocurrency mining sector, with lenders increasingly reluctant to extend credit to miners facing difficult market conditions.
