"Crypto lender Celsius Network's legal journey has gained another chapter as Bitcoin miner Core Scientific accused the company of refusing to pay its bills since filing for Chapter 11 bankruptcy, according to court papers filed on Oct. 19. Core Scientific, which is one of the largest publicly traded crypto companies, claims the default on payments is threatening its financial stability, already hurt by crypto winter and high energy costs" [Pereira, A.P. Celsius Network defaults on payments to Core Scientific, causing financial unrest. (Accessed October 22,2022)].
Celsius is seeking a civil contempt sanction against Core (rather than the more typical breach of contract claim under the circumstances) for the alleged failure of Core to timely deploy mining rigs and supplying less electricity than that required under the contract under the guise of a violation of the bankruptcy 'automatic stay'. In response, Core has demanded that Celsius be compelled to pay the past-due sums owed it, or, in the alternative be permitted to terminate it's contract with Celsius.
"As per the filing, Celsius owes Core $598,743.20 for post-petition PPT charges related to the August 2022 invoice, plus another $1,505,940.08 for post-petition PPT charges related to the September 2022 invoice, yielding a total of $2,104,683.28. 'Core continues to lose approximately $53,000 per day to cover the postpetition increased electricity tariffs that Celsius refuses to pay,' said the company" [Id].
Core's Court filing sums up its position perfectly:
[...] the Contempt Motion is a desperate attempt—in the midst of what appears to be a very challenging chapter 11 process that is far from the Debtors’ hoped-for outcome in these cases—to use the Debtors’ bankruptcy case as a sword to rewrite a hosting contract between Core and Celsius Mining LLC (“Celsius”) and in the process attempt to foist millions of dollars of increased power costs onto Core’s balance sheet instead of their own. Celsius’s attempt is contrary to the contract, the parties’ course of conduct, and the contractual relationship Core has had with virtually every other customer. Quite simply, Core did not violate the stay—it is Celsius that has breached and is breaching the contract. Celsius either needs to adhere to the contract, or Core and Celsius must terminate their relationship before Celsius causes yet another business partner to enter insolvency proceedings. (emphasis added)
[Weil, Gotshal, & Manges, LLP. CORE SCIENTIFIC, INC.’S OBJECTION TO DEBTORS’ MOTION TO ENFORCE THE AUTOMATIC STAY AND FOR CIVIL CONTEMPT. (Accessed October 22, 2022)].
United States Bankruptcy Court Judge, Hon. Martin Glenn has scheduled a hearing on Celsius' Motion for November.
"North America and Europe's miner profit margins are being squeezed by rising energy costs, with U.S. industrial electricity prices rising 25% from $75.20 per megawatt hour to $94.30 per megawatt hour from July 2021 to July 2022. As a result, hosting service providers are also increasing their power prices in hosting contracts, according to Hashrate Index's Q3 mining report." [Pereira, supra].
Following it's freezing of protocol withdrawals as well as it's being independently investigated by six states, Celsius filed for bankruptcy protection on July 13, 2022. At that time Celsius reportedly was in debt to the tune of $1.9 billion.
Since the filing of the bankruptcy petition the case has not proceeded forward smoothly and is proving to be a troublesome and highly complex matter.