Limestone Bitcoin miner at center of lawsuit secures more financing as price slides

JOHNSON CITY, Tenn. (WJHL) - The financially strapped owner of a Bitcoin mine in Limestone — who Washington County is suing — recently procured $2.25 million in promissory note financing as it tries to successfully go public while carrying what is now $60 million in debt and navigating falling Bitcoin prices.

Whether GRIID Infrastructure's financial challenges end up having a direct impact on how long it operates in Washington County is an open question, a local economist told News Channel 11 Thursday.

It's also an arguably important factor for county commissioners to consider as they weigh whether to settle their lawsuit against GRIID's subsidiary Red Dog Technologies — a settlement that would see Red Dog close its Limestone mine but build a new one in Telford.

"If they're meeting their variable costs with what they earn from mining Bitcoin, their lender might be pretty patient through the 'crypto winter,'" Milligan University economist David Campbell told News Channel 11. Those variable costs would include the power purchased from BrightRidge, which leases land to Red Dog next to its Bailey Bridge Road substation, and other non-debt ongoing expenses.

Cryptocurrency prices dropped sharply in the spring and continued to slide into the summer. A shakeup in crypto markets this week has sent Bitcoin prices even lower, making the revenues of miners like GRIID much lower than they were a year ago.

"It comes down to whether they (lenders) think they have a chance to recover a bigger portion of their investment later as opposed to calling the loan in soon," Campbell said, explaining that accelerating the indebtedness would likely put GRIID in bankruptcy.

GRIID "issued promissory notes ... in exchange for loans of $250,000 and $2,000,000, respectively" on Sept. 2 and Sept. 15, according to a federal filing from Adit EdTech Acquisition Corp., the company that hopes to take GRIID public.

The Nov. 4 filing is related to Adit EdTech's effort to extend the deadline shareholders will allow for GRIID to complete a merger and go public. An Oct. 19 filing revealed that GRIID's main lender, Blockchain Access UK Ltd., ended a line of credit and converted GRIID's debt to a $57 million term loan recently.

"The company and other parties are working to secure additional sources of financing to provide further liquidity to the post-Merger surviving company ("New GRIID")," the Securities and Exchange Commission filing notes.

GRIID did note in a November 2021 investor presentation that "at scale" it would break even with Bitcoin prices as low as $6,200. But GRIID at scale assumed a mining capacity of more than 1,000 megawatts. GRIID's actual capacity at that time was 48 megawatts, with roughly half of that at the Limestone site.

GRIID, whose subsidiary Red Dog Technologies officially owns the Limestone mine, also awaits a Nov. 28 Washington County Commission decision on a proposed settlement in the county's lawsuit the county filed against Red Dog in November 2021. The lawsuit sought closure of the noisy mine next to a BrightRidge substation in the New Salem community in exchange for monetary concessions and construction of a new facility in the Washington County Industrial Park (WCIP).

Telford residents, where WCIP is located, quickly protested when the settlement was initially discussed in June, despite language that placed some limits on noise. Bitcoin "mines" are actually banks of high-powered computers that perform complex equations to "mine" new Bitcoin and verify the cryptocurrency's transactions. They often emit high noise levels from fans used to cool the computer equipment — something that occurs at the Limestone mine and drew complaints from neighbors starting in May 2021.

The county's Commercial, Industrial and Agricultural (CIA) committee recommended at its Nov. 3 meeting that the full 15-member commission reject the settlement proposal when it meets Nov. 28.

In effect, that would send the county, Red Dog and BrightRidge, the original defendant in the suit, back to Washington County Chancery Court.

The settlement proposal would have Red Dog pay nearly $250,000 to buy seven acres of land at the WCIP, and another $200,000 (so far) in $500 a-day penalties for having operated the Limestone mine in violation of Washington County's zoning rules.

Red Dog/GRIID would then face the further expense of constructing a new Bitcoin mine, which the proposed settlement gives it until the end of 2024 to do.

The new promissory notes come with warrants to the lenders giving them access to "Class B" units of GRIID stock. If GRIID goes public, Dwaine Alleyne, the $250,000 lender, could own 8,616 shares and Endeavor Blockchain LLC, the $2 million lender, could own 69,278 units.