Iris also said its debtors are wholly owned subsidiaries which are legally structured as special purpose vehicles (SPVs), which means the creditor New York Digital Investment Group (NYDIG) has no financial recourse over parent company Iris Energy.
The mining hardware’s market value plunged below the principal amount of the loans in November 2022, after the bitcoin price lost around 75 per cent over the past year.
In a November 21 statement filed with the US securities regulator the SEC, Iris conceded that its creditors are now demanding immediate payment of the loans in full under default notices issued.
The stock plunged 18 per cent to $US1.55 on the news, with Pomerantz publicising its potential claim for significant financial compensation the same day. The law firm has prepared a draft court claim against Iris seen by the Australian Financial Review.
Bitcoin miners like Iris and fellow Australian-player Mawson Infrastructure now operate in a tough environment, with horror headlines over bankruptcies, plunging bitcoin prices, and soaring energy bills pressuring their unit economics.
Other industry problems include a rapid advance in mining equipment capability and a sharp uplift in the network hashrate – a term to describe how difficult it is to solve the puzzles that mine bitcoins.
Iris’ decision to unplug some of its mining hardware in response to its $US107.8 million default notice sparked a slump in the total bitcoin hashrate across the network earlier this week.
In turn, this delayed the confirmation of new blocks and the generation of new bitcoins.
While Iris maintains it sells its bitcoin immediately and irrespective of market price, not all miners do this.
Data by Glassnode, a crypto mining analysis service, shows that bitcoin miners are dumping their holdings in droves, as they aim to outrun the contagion caused by the FTX collapse. Bitcoin miner selling pressure has jumped 400 per cent over the last three weeks, according to Glassnode.
Iris’ sustainable energy bills reached $US9300 per bitcoin mined in October. For the financial year ending June 30, it reported adjusted EBITDA (backing out certain costs) of $US16 million on bitcoin mining revenue of $US59 million.
Its net loss ballooned to $US417 million after adjusting for losses on convertible notes and derivatives that converted into shares upon the group’s problematic Nasdaq listing.