Bitcoin mining giant Poolin files for Chapter 11 as $173.1M in asset liabilities raises concerns

Once one of the biggest Bitcoin [BTC] mining pools globally, Poolin has declared Chapter 11 bankruptcy in the United States. The filing includes the parent company Poolin, which is based in Singapore, as well as its U.S subsidiaries Lonestar Dream Inc. and Lonestar Taproot LLC. 

With this declaration, the companies are seeking a court-supervised liquidation of their remaining assets. This will center around their mining infrastructure in Texas, rather than reorganizing and continuing to operate under Chapter 11.

This, in turn, would mark the end of a financial meltdown that started during the bear market for cryptocurrencies in 2022. 

Poolin underwater

According to the filings, the total assets and liabilities range from $1 million to $10 million and $100 million to $500 million, respectively.

A more accurate picture was shared by Chief Restructuring Officer Michael DuFrayne’s declaration as it placed the total pre-bankruptcy obligations at about $173.1 million.

Of that sum, almost $163.7 million is made up of unsecured debts. This amount is owed to Poolin Wallet users whose assets were rendered inaccessible following the company’s 2022 withdrawal freeze.

What’s the actual cause behind this?

Here, instead of its mining operations, Poolin’s wallet business was the main source of its financial burdens. This, because the company allowed users to deposit cryptocurrency, borrow USDT against collateral, and earn yield during the cryptocurrency boom.

Following the 2022 market crash, it suspended withdrawals and gave approximately 11,700 customers IOU tokens worth $163.7 million, rendering them unsecured creditors.

However, after borrowing $213 million against cryptocurrency collateral from Antalpha Technologies, its problems got worse. In the months ahead, Poolin suffered enormous losses when Antalpha liquidated the collateral in late 2022 as prices fell. At the same time, its mining expansion in the United States also failed. 

Additionally, mining operations were also found to be unsustainable. At last, after approximately $45.9 million in operating losses incurred by Lonestar Dream and Lonestar Taproot, Poolin closed its Texas sites for mining and hosting on 10th July. 

And yet, despite the failure of its Bitcoin mining business, it marketed the assets to over 335 prospective buyers before declaring bankruptcy. This resulted in 28 non-disclosure agreements and seven letters of intent.

In the past, the business also attempted to sell its Texas operations to China Green Agriculture for $49 million. However, the deal never went through.

Poolin is now trying to sell its remaining assets and give the money to its creditors through Chapter 11. Nevertheless, the amount recovered for Poolin Wallet users is anticipated to be contingent upon the outcome of the auction and is probably going to be far less than the $163.7 million that is owed to them.

Bitcoin miner status sparks concerns

This news comes on the heels of AMBCrypto’s recent report on the Miners’ Financial Health Index, which indicated that miners were under a lot of pressure. In fact, the CryptoQuant graph below further confirmed a protracted period of miner surrender.

According to the same, the hashrate drawdown remained consistently negative, worsening to about -16% by July. Additionally, Bitcoin’s true hashrate also fell to -12 precipitously starting in late January and never fully recovered.

All in all, in the broader market too, miners have been taking machines offline in greater numbers. Especially as profitability declined.

Final Summary

• Firm has total assets and liabilities ranging from $1 million to $10 million and $100 million to $500 million, respectively.
• Despite the challenges, Poolin marketed the assets to over 335 prospective buyers before going bankrupt.