Bankruptcy Court

Core Scientific to transfer $20M of equipment to settle bankruptcy dispute

Millions of dollars worth of electrical equipment will be transferred to the crypto miners’ exclusive energy negotiator to settle a payments dispute.

A $20 million settlement between Bitcoin (BTC) miner Core Scientific and its energy negotiator Priority Power Management has been approved by the judge in Core Scientific’s bankruptcy proceedings.

In a March 20 filing in the United States Bankruptcy Court for the Southern District of Texas, Judge David Jones signed off on allowing Core Scientific to transfer around $20.8 million worth of equipment to Priority Power.

The companies had been in a dispute over two Texas-based mining facilities that were slated to receive 1,000 megawatts of power between them to increase Core Scientific’s mining capacity.

Core Scientific’s facility in Marble, North Carolina. Source: Core Scientific

In a declaration filed on March 19, Core Scientific executive Michael Bros said it brought on Priority Power in June 2021 to exclusively manage, consult and develop infrastructure to fulfil its energy needs “on a short ramp-up schedule.”

However, Bros said that by May 2022, “it became clear that the Facilities would not receive the anticipated power load,” and Core Scientific stopped making payments to Priority Power, which “suffered significant losses.”

Priority Power then claimed Core Scientific owed it around $30 million for the work it had performed before the miner filed for Chapter 11 bankruptcy in December last year.

Related: Crypto mining in 2023 — Is it still worth it?

The judge’s decision means that Priority Power will be given $20.8 million worth of equipment from the now-bankrupt firm, including electrical equipment such as power transformers and breakers.

The deal also promises that Core Scientific “will introduce” Priority Power “to any acquirer” of its sites in Texas, so that it can potentially go into an energy management and consulting agreement with the new owners.

Priority Power will also get to keep $514,000 earned by curtailing power for Core Scientific. The miner will also reimburse the firm “for legal fees and out-of-pocket expenses up to $85,000.”

Core Scientific filed for bankruptcy due to pressure from falling company revenues, low Bitcoin prices and litigation costs against the bankrupt crypto lender Celsius.

Core Scientific has been forced to hand over equipment before, making made a deal in February with New York Digital Investment Group to pay off a $38.6 million debt by handing over more than 27,000 mining rigs that were used as collateral.

US officials appeal protections for Voyager execs in Binance.US sale

The DOJ disagrees with the legal protections given to those involved in the Voyager sale to Binance.US, saying the court “improperly” exceeded its authority.

United States officials want to remove a provision included in bankrupt lender Voyager Digital’s plan to sell its digital assets to crypto exchange Binance.US that would prevent them from legally pursuing anyone involved with the sale. 

In a motion filed on March 14 in a New York bankruptcy court, U.S. trustee William Harrington and other government attorneys argued “the court improperly exceeded its statutory authority” in approving the pardoning.

They requested the court’s approval of the sale be delayed for two weeks to allow them to file an appeal.

The provision protects those involved in carrying out the sale from being held personally liable for its implementation, which the court approved on March 7 after it was found that 97% of Voyager customers favored the plan, according to a Feb. 28 filing.

While U.S. officials are not objecting to other parts of the proposed sale, they argue the provision would impede the government’s “ability to enforce its police and regulatory powers.”

On March 6, the U.S. Securities and Exchange Commission also objected to the plan, particularly the “extraordinary” and “highly improper” exculpation provision, arguing the repayment token would constitute an unregistered security offering, and that Binance.US is operating an unregulated securities exchange.

Related: Binance.US, Alameda, Voyager Digital and the SEC — the ongoing court saga

A hearing on the issue is set to occur on March 15 at 2:00 pm Eastern Time.

Based on the latest estimates, the plan is expected to result in Voyager creditors recovering approximately 73% of the value of their funds.

Celsius files to reopen withdrawals for a minority of customers

Celsius has motioned for $50 million worth of the total $225 million held in the Custody Program and Withhold Accounts to be released to owners.

Beleaguered crypto lender Celsius Network has filed a motion with the United States Bankruptcy Court yesterday to allow customers with digital assets held in certain accounts to be withdrawn. 

There’s a catch, however, as the motion will only apply to Custody and Withold Accounts and for custodied assets worth $7,575 or less in value.

Celsius has structured their Custody and Withhold Accounts, which essentially serve as storage wallets, in a way that still enables users to maintain legal ownership of cryptocurrency.

This ownership, however, is not extended to assets held in accounts that offer annual crypto earnings or borrowing services (Earn and Borrow accounts).

The community response to the motion has been mixed, with creditors happy that Celsius Network has conceded funds held in its “Custody Program and Withhold Accounts likely do constitute property of their estates.”

However, as tweeted by BnkToTheFuture.com CEO Simon Dixon — the community believes the amount Celsius wants to release is far short of what is equitable.

As Dixon points out, only $50 million of the $210 million held by 58,300 users in custody accounts is set to be released, with all funds above $7,575 which were transferred from the Earn Program and Borrow Program into Custody and Withhold accounts not included within the released amount.

The $7,575 amount is referred to as the “statutory cap” and Celsius is unable to avoid transferring amounts less than this total upon creditor requests as per section 547(c)(9) of the Bankruptcy Code. 

The filing also mentions that an additional $15.33 million is held in Withhold Accounts by approximately 5,000 customers as of Monday

To attain that $50 million figure, Celsius lawyers have distinguished between “Pure Custody/Withhold Assets” and “Transferred Custody/Withhold Assets,” with “Pure” assets those which were not transferred from the Earn or Borrow Programs. This division of funds has not been well received by community members.

In response to a Friday Twitter post from Celsius, countless community members have made it known that they want nothing short of all their funds back.

Celsius states that assets locked in the Earn and Borrow Programs are likely property of their estates, with transfers of these assets to Custody or Withhold accounts being described as “a transfer of the Debtors’ property to customers.”

Within the filing, Celsius states that the “relief sought in this Motion may not be supported by every customer or stakeholder, and that it may not go as far as some Custody Program customer and Withhold Account holders may wish.”

It suggests the motion is merely a “first step forward, and not the last word on, efforts to return assets to customers.”

Related: Celsius bankruptcy proceedings show complexities amid declining hope of recovery

The motion comes just one day after an ad hoc group of 64 custodial account holders filed a complaint alleging that title to custody assets “always remains with the user” as per the accounts’ terms of use, with the group seeking to recover more than $22.5 million worth of assets.

A hearing on the motion is scheduled to be held on Oct. 6, and as it stands, users have had their assets locked up on the platform for more than two months.

Voyager received better buyout offers than FTX’s, set to return $270M to customers

The crypto lender will be allowed to return a portion of customer funds locked up at the Metropolitan Commercial Bank which have been frozen until now.

Beleaguered crypto lender Voyager Digital Holdings says it has received a number of “higher and better” buyout offers than that offered by AlamedaFTX back in July, contrary to the investment firm’s continued public statements. 

The company has also just been cleared to return $270 million in customer funds held at the Metropolitan Commercial Bank (MCB) by the judge presiding over its bankruptcy proceedings in New York.

In a Second Day Hearing Presentation on Thursday, Voyager stated that it has received word from as many as 88 interested parties keen to bailout the company from its financial woes, adding it is in “active discussions” with over 20 potentially interested parties.

One of the most high-profile bids came from Alameda and FTX in July.

Alameda had proposed to buy all of Voyager’s assets and outstanding loans except the defaulted loan to Three Arrows Capital, then liquidate the assets and distribute funds in USD through the FTX US exchange.

This was rejected by Voyager on July 25 on the grounds that it was not “value-maximizing” for its customers. 

 The company also noted that it has already received bids through the marketing process that are “higher and better than AlamedaFTX’s proposal,” contrary to alleged “inaccurate” public statements from AlamediaFTX. 

Source: Voyager Digital Second Day Presentation

Voyager stated that it has also separately sent AlamedaFTX a cease and desist letter regarding its “inaccurate” public statements, confirming that AlamedaFTX does not have a “leg up” on other bidders. 

$270M in customer funds returned

News about other interested bidders comes at the same time that U.S. Bankruptcy Court Judge Michael Wiles has given Voyager the all-clear to return a portion of its customer’s cash deposits.

According to a Thursday report from the Wall Street Journal, Wiles stated that Voyager had provided a “sufficient basis” for its claim that customers should be granted access to the custodial account held at the Metropolitan Commercial Bank, which is understood to hold $270 million in cash.

Voyager had funds stashed in the account at the bank when it filed for bankruptcy on July 5. Those funds were frozen when bankruptcy proceedings began.

Related: Deposits at non-bank entities, including crypto firms, are not insured — FDIC

Voyager Digital CEO Stephen Ehrlich mentioned in July that he intended to return customer funds from MCB as soon as a “reconciliation and fraud prevention process” was completed, and the firm reportedly asked to have the funds in the MCB released on July 15.

Voyager’s debt amounts to a sum no greater than $10 billion from roughly 100,000 creditors, but is not the only such brokerage, lender or investment firm in crypto to have fallen on hard times for itself and its users. Celsius, Three Arrows Capital, BlockFi and others have also been swept up in the ongoing saga.

Voyager to return $270M in customer funds, says it received ‘better’ offers than FTX

The crypto lender will be allowed to return a portion of customer funds locked up at the Metropolitan Commercial Bank which have been frozen until now.

Beleaguered crypto lender Voyager Digital Holdings says it has received a number of “higher and better” buyout offers than that offered by AlamedaFTX back in July, contrary to the investment firm’s continued public statements. 

The company has also just been cleared to return $270 million in customer funds held at the Metropolitan Commercial Bank (MCB) by the judge presiding over its bankruptcy proceedings in New York.

In a Second Day Hearing Presentation on Thursday, Voyager stated that it has received word from as many as 88 interested parties keen to bailout the company from its financial woes, adding it is in “active discussions” with over 20 potentially interested parties.

One of the most high-profile bids came from Alameda and FTX in July.

Alameda had proposed to buy all of Voyager’s assets and outstanding loans except the defaulted loan to Three Arrows Capital, then liquidate the assets and distribute funds in USD through the FTX US exchange.

This was rejected by Voyager on July 25 on the grounds that it was not “value-maximizing” for its customers. 

 The company also noted that it has already received bids through the marketing process that are “higher and better than AlamedaFTX’s proposal,” contrary to alleged “inaccurate” public statements from AlamediaFTX. 

Source: Voyager Digital Second Day Presentation

Voyager stated that it has also separately sent AlamedaFTX a cease and desist letter regarding its “inaccurate” public statements, confirming that AlamedaFTX does not have a “leg up” on other bidders. 

$270M in customer funds returned

News about other interested bidders comes at the same time that U.S. Bankruptcy Court Judge Michael Wiles has given Voyager the all-clear to return a portion of its customer’s cash deposits.

According to a Thursday report from the Wall Street Journal, Wiles stated that Voyager had provided a “sufficient basis” for its claim that customers should be granted access to the custodial account held at the Metropolitan Commercial Bank, which is understood to hold $270 million in cash.

Voyager had funds stashed in the account at the bank when it filed for bankruptcy on July 5. Those funds were frozen when bankruptcy proceedings began.

Related: Deposits at non-bank entities, including crypto firms, are not insured — FDIC

Voyager Digital CEO Stephen Ehrlich mentioned in July that he intended to return customer funds from MCB as soon as a “reconciliation and fraud prevention process” was completed, and the firm reportedly asked to have the funds in the MCB released on July 15.

Voyager’s debt amounts to a sum no greater than $10 billion from roughly 100,000 creditors, but is not the only such brokerage, lender or investment firm in crypto to have fallen on hard times for itself and its users. Celsius, Three Arrows Capital, BlockFi and others have also been swept up in the ongoing saga.