PwC Pursues IREN over Bitcoin Miner Debt Dispute in Australia
PwC (and NYDIG) is not letting IREN off the hook
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The co-founders of IREN could be compelled to undergo an examination by PwC regarding the Bitcoin mining firm’s involvement in the default on $105 million in equipment loans financed by NYDIG in 2021.
An Australian Federal Court judge ruled on Friday that the bankruptcy proceedings of two special-purpose vehicles (SPVs) of IREN in Canada are recognized as foreign proceedings in Australia, where IREN is headquartered and its two co-founders and co-CEOs William and Daniel Roberts reside.
This ruling could allow PwC, appointed by the Canadian bankruptcy court as trustee, to further investigate IREN’s possible role in its two SPVs’ default on the NYDIG loans in an effort to recover compensation for the creditor.
PwC’s move to pursue IREN in its home country follows NYDIG’s partially unsuccessful attempts to seek damages from IREN in the Supreme Court of British Columbia over the past years.
The dispute centers on a $105 million equipment loan NYDIG provided to IREN’s two SPVs, IE CA3 and IE CA4, to purchase 35,000 S19 Bitcoin miners, which were pledged as collateral. The core issue lies in how IREN structured the SPVs to use the financed hashing power.
As previously reported, IE CA3 and IE CA4 entered into a hosting agreement and a hashrate lease agreement with other IREN subsidiaries. The SPVs paid IREN a fixed hosting fee of CAD$0.08/kWh, while IREN paid a fixed leasing fee of CAD$0.096/kWh to the SPVs for utilizing the financed miners, which operated at efficiencies of either 29.5 J/TH or 34.5 J/TH.
Effectively, the two SPVs generated a daily hash revenue of only about $50/PH/s throughout 2022, while their hashcosts were about $41.4/PH/s. During this time, Bitcoin’s fair market hashprice ranged between $60/PH/s and $240/PH/s. The SPVs were responsible for repaying the NYDIG loans without any guarantees from their parent company. PwC argued that these agreements prevented the SPVs from generating enough profit to repay NYDIG even at the beginning of the loan orgination.
In November 2022, the SPVs defaulted on the loan after Bitcoin’s hashprice dropped to $60/PH/s, leading to the shutdown of the financed miners. In January 2023, NYDIG filed in the Supreme Court of British Columbia for the appointment of PwC as receiver and manager of its secured collateral, which the court approved.
After months of delays and negotiations, PwC conducted an auction in June 2023 to sell the Antminers, though the value of the collateral had significantly decreased during the bear market. PwC also placed the SPVs into bankruptcy proceedings and was appointed trustee of their estates.
At the same time, NYDIG petitioned the Canadian court to treat Bitcoin mined by the financed equipment as collateral. However, this request was denied in August 2023. The court did rule, however, that the hashpower agreements between IREN and its SPVs should be “declared void as fraudulent conveyances” due to the wide discrepancy between Bitcoin’s fair market hashprice and the fixed hashprice IREN paid to the SPVs.
Over the past year, PwC examined certain IREN executives but informed the Federal Court of Australia that the examinations did not provide sufficient information to conclude its investigations.
“A variety of factors resulted in the examinations being unsatisfactory from the Trustee’s perspective, including the inability to examine Mr. Daniel Roberts and Mr. [David] Bartholomew [independent director], the limited time available under the Orders for the Trustee to conduct the examinations, and the number of unanswered questions (by way of objection or otherwise),” PwC stated in an affidavit to the Federal Court of Australia.
PwC aims to further investigate IREN’s corporate structure, particularly the commercial rationale behind the hashpower and hosting agreements with the SPVs, as well as the various intercompany transactions within the IREN group.
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