Poolin, Once-Dominant Bitcoin Mining Giant, Announced Bankruptcy

Key Takeaways:

• Poolin has filed for Chapter 11 bankruptcy protection in the U.S., representing about 20% of Bitcoin’s global hashrate.
• Prepetition obligations totaled about $173.1 million of which around $163.7 million is tied to IOUs issued to customers since the freeze on wallet withdrawals in 2022.
• Poolin will sell the mining assets in Texas under a $52 million stalking-horse sale.

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Poolin’s bankruptcy filing marks the end of one of the most tumultuous chapters in the history of crypto mining. After years of losses, liquidity problems and a failed expansion, the company, once one of the most influential, is now asking for court-supervised selling off of assets.

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The Singapore-based Poolin Technology and its U.S. subsidiaries have sought Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the District of New Jersey. The restructuring is being primarily made to enable the company to sell its remaining mining assets, as opposed to continuing with its normal activities, court documents indicate.

The proposed transaction involves two West Texas mining properties and Thor CALAP LLC is a stalking-horse bidder. The original offer values the assets at $52 million, which sets up a minimum price but can be bumped up later in the bankruptcy proceeding. It is reported that operations have supposedly stopped at both facilities earlier this month as Poolin continues to prepare for winding up operations.

The table of liabilities on Poolin’s bankruptcy paperwork is in the ballpark of $100 Million to $500 Million and listed assets are considerably lower. Between 10,001 and 25,000 creditors are reportedly involved in the filing, illustrating the company’s size and financial needs.

The Poinings debt is not from mining but from its wallet. In September 2022, when the crypto market experienced a significant downturn, the company paused withdrawals due to liquidity issues in the wake of the broader market crash.

Rather than refunding user deposits, Poolin gave them unsecured IOUs for the money that they had locked up. The debts owed to customers now represent about $163.7 million of the firm’s estimated debt of $173.1 million, according to restructuring documents, putting the claims of customers at the forefront of the bankruptcy process.

Since launching in 2017, Poolin has exploded in growth, as industrial Bitcoin mining has expanded, and at its peak had approximately 20% of the network’s hashrate. It was founded by former Bitmain executives, and during the previous cycle of Bitcoin growth, it has become one of the world’s largest mining pools.

But in the next few years, the industry took a dramatic turn. China’s Crypto mining ban pushed the top operators to overseas locations and the extended bear market, dwindling mining profit, and the increase in infrastructure expenses added strain to mining operations.

Poolin also put large capital into the mining of Texas, and expected significant higher allocations than received. The mismatch resulted in the company having over-ordered mining equipment, and asset sales at reduced prices during the time while the Texas operations continued to lose money and at a later time were closed.

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