Bcause it is such a good deal!

Thom Thompson

Thom Thompson

Contributing Editor

Bcause, the cryptocurrency mining infrastructure provider that asked for bankruptcy court protection in April, filed its proposed reorganization plan with the federal court on Wednesday afternoon. Providing mining infrastructure services was only one of the company’s original lines of business, but it is the only one that Bcause has launched. The bankruptcy allowed Bcause to continue to service its handful of clients, three of which contribute more than 95% of Bcause’s revenues.

Currently, Bcause operates a data center in Virginia Beach. The documents refer to it as a “state of the art mining facility” in spite of testimony earlier this summer that, in addition to having air conditioning problems and violating local safety code, the data center recently suffered a significant power “event” which put a number of customers’ mining servers out of commission. 

Since the April filing, Bcause has shed its CEO, CRO, and GC, among others, as well as its aspirations to be a full-fledged futures exchange with its own clearinghouse. Its plan to integrate four lines of business excited crytpo-market attention, and its plans to trade and settle derivatives got the Chicago community fired up back in 2017. The derivatives market staff were let go months ago.

According to the filings, Bcause still holds onto the hope that it will be able to launch a bitcoin trading platform. Federal Judge Janet Baer may be all that stands between Bcause and this dream. Will she take the deal?w

Bcause owes Nasdaq $845,000 related to the development of the cash and futures markets, and it seems that it thinks that operating a trading platform (Bcause refers to it as their “spot exchange”) is one of the best ways to recoup some of those expenses. Among the exhibits is a signed agreement from Nasdaq that says its debt will be assigned to a new subsidiary, the ironically named Bcause Secure.

The reorganization plan says all creditors will be repaid 100% in a little over four years if there is no cryptocurrency trading platform, a little over two years if they can launch trading. The platform will cost somewhere around $400,000 to get off the ground, and the exhibits include a handful of executed commitments from company insiders (shareholders and creditors already)  to fund the launch, if allowed by the court. Bcause forecasts that another $500,000 will be needed before trading breaks even.

In addition to the data center services and the trading platform, Bcause’s recovery hinges on the company getting into bitcoin mining itself. Bcause proposes to take over some damaged but repairable mining servers as well as unused inventory that its largest shareholder and major customer, SBI Holdings, owns under a lease-to-buy scheme. Bcause wants to use them to mine bitcoin for its own account. (Some of SBI’s  servers were damaged in the electricity event earlier this year at Bcause’s state of the art facility.) Bcause says bitcoin mining will “provide approximately an immediate $40,000 per month in revenue for the Debtors, as [the] bitcoin price is currently over $11,600” while the company competes with its own customers for scarce bitcoin rewards. It will be interesting to see if Judge Baer likes the odds on this part of the deal.   

The hearing on the reorganization plan is set for 10:00 a.m. Thursday, August 8. There is no telling how it will go because you never know what bargains have been struck among creditors and/or what bitter medicine any or all of the parties may be willing to swallow. Judge Baer could dissolve the bankruptcy Thursday and let the secured creditor exhaust the cash resources of the company, killing off Bcause quickly. Of course the secured creditor still has to prove it has a secured claim and thus priority over the unsecured creditors. In other words, this is probably not the end of the proceedings.

Note: Thom Thompson and John Lothian News have each supplied services on a contractual basis to Bcause in the past.

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