Joel R. Glucksman
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201-896-7095 jglucksman@sh-law.comFirm Insights
Bitcoin Mining Manufacturer Files for Bankruptcy
Authors: Joel R. Glucksman, Donald Scarinci
Date: June 17, 2014
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HashFast, a manufacturer of bitcoin mining equipment, has filed for protection under Chapter 11 of the bankruptcy law, according to CoinDesk. A creditor, Liquidbits, had filed an involuntary Chapter 7 bankruptcy against HashFast, forcing it to request a conversion to a voluntary Chapter 11 reorganization proceeding.
U.S. Bankruptcy Judge Dennis Montali granted HashFast’s request June 7, after coming close to appointing a Chapter 7 trustee at creditor LiquidBits’ request, the news source reported. The latter firm alleged that HashFast failed to make good on a $6 million order. Just one month ago, the company laid off half of its workforce and issued a public denial that it was filing for bankruptcy.
In a blog post, HashFast explained that it would be entering Chapter 11, and that it intends to reorganize in order to provide more value to its creditors than it would in a liquidation. Eduardo DeCastro, the CEO of the company, will be stepping down. Monica Hushen, HashFast CTO, will be handling business operations and bankruptcy matters. The company also announced that it had retained Katten Muchin Rosenman LLP as its bankruptcy council.
According to CryptoCoinsNews, HashFast’s troubles began when its customers began demanding refunds, as the company’s hardware began lagging behind that of the competition. Bitcoin mining takes large amounts of processing power and electricity, and returns are cut in half regularly as a part of the currency’s algorithm, which mandates an asymptotical approach to 21 million bitcoins. This means that mining remains economically viable only if the currency continues to appreciate in value or the cost of mining technology continues to fall.
HashFast has cut its costs and intends to restructure to a more viable business strategy. Bitcoin mining can still be viable on a large scale, but it is yet to be seen whether HashFast will be.
If you have any questions about this post or would like to discuss your company’s creditors’ rights and bankruptcy matters , please contact me, Joel R. Glucksman at www.ScarinciHollenbeck.com.
- Practices: Bankruptcy & Creditors' Rights
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