Eden Prairie-based Compute North files for bankruptcy protection

The cryptocurrency crash and rising energy prices have claimed one of the crypto industry's largest services providers.

Compute North, an Eden Prairie-based company that builds scalable data centers for blockchain, cryptocurrency mining and distributed computing firms, has filed for Chapter 11 bankruptcy protection in the Southern District of Texas.

"The company has initiated voluntary Chapter 11 proceedings to provide the company with the opportunity to stabilize its business and implement a comprehensive restructuring process that will enable us to continue servicing our customers and partners and make the necessary investments to achieve our strategic objectives," Kristyan Mjolsnes, head of marketing and sustainability at Compute North, said in an email.

Compute North's co-founder and CEO Dave Perrill resigned from operations earlier this month but remains a board member. Drake Harvey, who was the chief operating officer, is now listed as president.

The company made its initial filing Thursday for itself and 18 related limited liability companies. Chapter 11 protection allows companies to reorganize their finances in a court-supported way while maintaining daily operations.

According to the filing, the company has more than 200 creditors and between $100 million and $500 million in assets and a similar amount of liabilities.

Compute North had raised $385 million in debt and equity this year. About $300 million of that capital was in debt financing; the remainder was equity financing from private equity investors familiar with independent and sustainable energy projects.

Compute North had built data centers in Nebraska, Texas and South Dakota, and the newly raised capital was to fund expansion at existing facilities and construction of additional data centers. The company had recently opened a fifth data center in McCamey, Texas, adjacent to a wind farm and in August began construction on another center in Granbury, Texas.

Cryptocurrency mining companies and hosting companies require a great deal of computing power that unlock new currency and to record transactions in widely distributed blockchain.

Compute North's promise was to be a sustainable host company by building their data centers in modular and scalable segments and to utilize curtailable power that could make use of variable sources of renewable power, such as solar and wind farms. Power could also be curtailed — cutting their power needs should the electric grid demand more power during peak periods or in case of system outages caused by storms or other events.

Bitcoin, one of the most popular cryptocurrencies, is down about 60% in 2022, mirroring similar declines for other cryptocurrencies. And despite the use of renewable power, rising energy prices had also stressed Compute North.

In a declaration filed with the Texas bankruptcy court, Compute North's chief financial officer, Harold Coulby, said those developments, as well as supply chain issues and this year's apparent falling-out with one of its debt investors — San Francisco-based Generate Capital — contributed to the Chapter 11 filing.

According to Coulby's declaration, Generate had agreed to lend the company $300 million in February. In July, Generate said Compute North was in default on some technical events of the loan and took control of portions of the company, building on Compute North's liquidity crisis.