The cryptocurrency crash and rising energy prices have taken a toll on one of the crypto industry’s biggest service providers.
Eden Prairie-based Compute North – which builds scalable data centers for blockchain, cryptocurrency mining and distributed computing companies – has filed for Chapter 11 bankruptcy protection in the Southern District of Texas.
“The company has entered into voluntary Chapter 11 proceedings to allow the company to stabilize its business and implement a comprehensive restructuring process that will allow us to continue serving our customers and partners and make the necessary investments to to achieve our strategic goals,” he said, Kristyan Mjolsnes, head of marketing and sustainability at Compute North, in an email.
Compute North co-founder and CEO Dave Perrill resigned from operations earlier this month but remains a board member, while Drake Harvey, who was chief operating officer, is now listed as president.
The company filed its initial filing for itself and 18 related limited companies on Thursday. Chapter 11 protection allows companies to recover their finances with court support while maintaining ongoing operations.
According to the filing, the company has more than 200 creditors and assets between $100 million and $500 million and liabilities of a similar amount.
Compute North had raised $385 million in debt and equity earlier this year. Approximately $300 million of this capital was debt financing; the remainder were equity financings from private equity investors familiar with independent and sustainable energy projects.
Compute North had built data centers in Nebraska, Texas and South Dakota, and the newly raised capital was used to expand existing facilities and build additional data centers. The company recently opened a fifth data center in McCamey, Texas, next to a wind farm, and in August began building another center in Granbury, Texas.
Cryptocurrency mining companies and hosting companies require a lot of computing power to unlock new currencies and record transactions on widely used blockchains.
Compute North’s promise was to be a sustainable host company by constructing its data centers in modular and scalable segments and using dispatchable energy that could utilize variable sources of renewable energy such as solar and wind farms. Power could also be constrained – by reducing power demand when the grid needs more power during peak periods or during system outages due to storms or other events.
Bitcoin, one of the most popular cryptocurrencies, is down about 60% in 2022, mirroring similar falls in other cryptocurrencies. And despite its use of renewable energy, rising energy prices had also weighed on Compute North.
In a statement filed with Texas bankruptcy court, Compute North’s chief financial officer Harold Coulby pointed to these developments, along with supply chain issues and an apparent dispute with one of its debt investors from earlier this year, San Francisco-based Generate Capital, which contributed to the Chapter 11 registration.
According to Coulby’s statement, Generate had agreed to lend the company $300 million in February. In July, Generate had stated that Compute North was in default due to some technical events of the loan and had taken control of some parts of the company that built on Compute North’s liquidity crisis.