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Crypto lender Celsius Network and bankrupt Bitcoin mining firm Core Scientific are in a legal battle over contractual obligations.
After Celsius Network filed a $4.7M administrative claim with Core Scientific, the mining company rejected it, saying that Celsius actually owed it a higher amount. The companies had a contract for hosting crypto holdings in Core's data centers, but due to increased power costs, Core charged Celsius. Although Celsius paid initially, it stopped making payments after filing for bankruptcy.
According to Core Scientific, Celsius Network owes them around $11 million, which includes nearly $8 million due to a violation of the agreed-upon dispute resolution mechanism. Each day, $28,000 in fees and interest adds up to the amount owed by Celsius to Core Scientific.
Core Scientific first accused Celsius of failing to pay its power bills on October 19, 2020, citing the non-payments as a significant factor in the liquidity issues that led to Core Scientific filing for Chapter 11 bankruptcy on December 21, 2020. Celsius' failure to pay its power bills is considered a material breach of contract, and on December 28, Core Scientific filed a motion seeking approval to reject Celsius' contracts. Celsius allowed Core Scientific to turn off over 37,000 Bitcoin mining machines hosted for the crypto lender on January 3.
Crypto Contract Dispute: Implications for the Industry.
The ongoing legal battle between Celsius Network and Core Scientific continues, with the latest chapter seeing Core Scientific reject Celsius' $4.7 million administrative claim. The dispute centers around a contract signed in 2020, in which Core Scientific agreed to host Celsius' cryptocurrency holdings in its data centers. However, after a rise in power costs, Core Scientific passed on these additional expenses to Celsius, which was reportedly included in the original contract. Despite initially paying these costs, Celsius stopped making payments after filing for bankruptcy.
The case underscores the importance of well-drafted contracts in the crypto industry, particularly when it comes to hosting cryptocurrency holdings and allocating associated costs. The outcome of this legal conflict could have implications for other crypto industry companies, particularly as they navigate the complex regulatory landscape and establish strong contractual relationships with service providers. As the crypto industry continues to mature, it is likely that more legal battles like this will arise, making it crucial for companies to ensure that they have well-defined contracts that cover all possible scenarios.