Marathon Digital Reports $81.3 Million Exposure to Bankrupt Mining Host Compute North

Marathon Digital’s Financial Exposure

Bitcoin (BTC) miner Marathon Digital Holdings has disclosed its exposure of approximately $81.3 million to Compute North, the mining hosting provider that recently filed for Chapter 11 bankruptcy on September 23, 2022. In an announcement on October 6, Marathon provided a breakdown of its exposure, highlighting the majority was held in operational deposits amounting to $50 million. These deposits were primarily related to King Mountain and Wolf Hollow, which serve as security deposits and prepayments for ongoing operations at these sites.

Details of Exposure Distribution

The remaining funds include $21.3 million allocated to an unsecured senior promissory note and $10 million in convertible preferred stock in Compute North. Despite the current uncertainty surrounding Compute North’s bankruptcy, Marathon Digital has stated that its BTC mining operations hosted at Compute North’s locations in Texas, Nebraska, and South Dakota will continue to function as usual.

No Expected Operational Impact

According to Marathon’s assessment, there will not be a significant effect on their operations. They stated, “Based on the information available today, we do not anticipate these proceedings impacting our current operations or our ability to achieve our primary target of 23 exahashes per second in 2023.” The company has noted that operations at King Mountain are proceeding on schedule, while delays at Wolf Hollow have been attributed to a regulatory issue explained by Compute North.

Mining Production Performance

Despite the challenges presented by the ongoing bear market, Marathon Digital has reported improvements in its operational performance. During the third quarter of 2022, Marathon mined a total of 616 BTC, equivalent to about $12.3 million. There was a significant month-over-month increase in production, as outputs escalated from 72 BTC in July to 360 BTC in September.

Mining Fleet Expansion

As of October 5, Marathon’s active mining fleet consisted of approximately 57,000 miners, producing around 5.7 exahashes per second (EH/s). This increase demonstrates the company’s resilience and commitment to growing its mining capabilities despite market pressures. Additionally, Marathon Digital’s total BTC holdings reached 10,670 BTC, valued at around $207.3 million as of September 30, alongside unrestricted cash reserves totaling $55.3 million.

Conclusion

Marathon Digital’s substantial exposure to Compute North amid its recent bankruptcy filing highlights the risks associated with the crypto mining sector in a volatile market. However, the company’s ongoing operational improvements and strategic focus on expanding its mining capabilities indicate a proactive approach to navigating the current challenges within the industry.