It is becoming increasingly likely that Core Scientific, one of the world’s largest bitcoin miners, is facing the threat of insolvency.
Bankruptcy rumours first emerged when, last Thursday, the Nasdaq-quoted company disclosed in a Securities and Exchange Commission (SEC) filing that “given the uncertainty regarding the company’s financial condition, substantial doubt exists about the company’s ability to continue as a going concern for a reasonable period of time”.
Core Scientific’s woes are the same as any other publicly listed bitcoin miner at the moment: Skyrocketing energy costs, plummeting bitcoin prices, and flatlining market valuations.
The latter is particularly severe for Core Scientific, with shares now over 98% down year to date.
The company was also exposed to the collapse of crypto lender Celsius Network, having earlier stated that the default on payments is “threatening its financial stability”.
Somewhat ironically, the board has decided not to make payments due with respect to several of its own equipment and other financings, including its two bridge promissory notes.
As a result, Core Scientific has opened itself up to being sued for nonpayment.
Core Scientific replaces auditor
SEC filings released today show that Core Scientific has “approved the dismissal” of auditing firm Ernst & Young (EY).
EY (which alongside KPMG, Delloite and PwC comprises the global “Big Four”) has been replaced with domestic firm Marcum LLP.
Per reporting requirements, Core Scientific conceded that EY cited numerous internal reporting deficiencies including “a lack of appropriate communication and recordkeeping” related to equity transactions and “design deficiencies in internal controls necessary to enforce appropriate segregation of duties for our digital asset wallets”.
But it hasn’t just been external auditors to go.
On October 19 Core Scientific “eliminated the position” held by chief accounting officer Brian Neville. Denise Sterling, the company’s executive vice president and chief financial officer, now serves as principal accounting officer.
Core Scientific has removed Neville from its website, though his LinkedIn profile has not been updated.
One week later, Core Scientific announced the appointment of Neal P. Goldman to
its board of directors for a monthly fee of US$35,000.
According to a PetroQuest profile, Goldman “has over 25 years of experience in investing and working with companies to maximize shareholder value,” serves as chairman of the board for PetroQuest Energyand Talos Energy, and is a member of the boards of Ultra Petroleum, Midstates Petroleum, and Ditech Holdings.
Core Scientific has been approached for comment.