Compute North, prior to its bankruptcy, served as the biggest hosting provider that Marathon Digital partnered with.
American cryptocurrency mining outfit Marathon Digital Holdings Inc (NASDAQ: MARA) is exploring options to acquire its bankrupt sister firm, Compute North Holdings. According to Marathon’s Chief Executive Officer, Fred Thiel, the company has hired restructuring specialists to help estimate the extent of its exposure to Compute North and to explore the firm’s chances of acquiring the distressed firm.
Thiel said the company has hired Guggenheim Partners and law firm Weil Gotshal & Manges for advice. Marathon Digital operates a somewhat different crypto-mining mode. The firm acquires high-performance crypto-mining machines but contracts other data centers to host them. This way, it cuts down on the cost of having to build its own mining farms.
Compute North, prior to its bankruptcy, served as the biggest hosting provider that Marathon Digital partnered with. The collapse of Compute North has also disrupted the core operations of Marathon Digital and the firm reported a $39 million impairment loss due to the bankruptcy filing. As Marathon Digital hinted recently, there is a possibility that it will be able to recover only as much as $22 million of the $42 million it has in deposit with Compute North.
The broader digital currency ecosystem has been very unsettling for crypto miners across the board and this is being manifested in reduced earnings. From the soaring electricity bills owing to the aftermath of the war in Ukraine on the global energy prices, to the declining prices of digital currencies, the leverage miners have in the space is clearly eroding.
Firms such as Compute North have been unable to cope thus far, and other key players like Argo Blockchain Plc (LON: ARB) have warned that it may also be forced to file for bankruptcy if it is unable to secure additional funding to prop up its operations.
Avalanche of Bankruptcies
Thus far this year, the most acclaimed players in the digital currency ecosystem have filed for Chapter 11 Bankruptcy in the United States and other jurisdictions.
Beginning with the Celsius Network, the firms with ongoing bankruptcy proceedings has also extended to Voyager Digital, BlockFi, Zipmex, Vauld Group, and top on the list, FTX Derivatives Exchange. The FTX implosion was the most shocking to the crypto world as the firm, up until it filed for bankruptcy ranked as the second-largest trading platform after Binance.
Under the leadership of its founder and former Chief Executive Officer Sam Bankman-Fried at the time, the company had paraded itself as the lender of last resort for firms like Voyager and BlockFi. The industry saw the collapse of FTX happen in just about a week, further sending a negative signal to investors who are now conservative about their investments.
Besides Marathon Digital which is looking at acquiring Compute North, other players including Galaxy Digital Holdings Ltd (TSE: GLXY) are also a regulatory approval away from acquiring GK8, a subsidiary of Celsius Network.