Crypto Burgum 1

FTX collapse creates a tough environment for North Dakota crypto projects, but they’re surviving so far

MINOT, ND – On a national level, we’ve all watched the stunning collapse of the cryptocurrency industry, headlined by the collapse of FTX, one of the companies led by then-billionaire Samuel Bankman-Fried.

FTX was a crypto exchange that allowed customers to transfer their wealth between various digital and traditional currencies. But, according to reports, FTX appears to have loaned its customer’s money (without their consent) to a sister company which in turn used it to make risky investments. It was basically a house of cards, and when it collapsed, the reverberations affected the entire crypto industry.

Not that things were great before that crash. Over the past year, crypto investors have lost trillions in value.

It’s a great twist, but what does it mean specifically for North Dakota?

Governor Doug Burgum has touted some crypto-related projects in our state, arguing that North Dakota’s relatively cheap power and our business-friendly environment are attractive to those looking to build power-hungry data centers.

Earlier this year, Atlas Power, in partnership with Montana-based FX Solutions, announced plans to make a roughly $2 billion investment in a crypto-mining data center — possibly the world’s largest — in the Williston area.

Burgum was the head of the announcement, which also made headlines due to the horrific background of one of the businessmen involved.

This summer Bitzero Blockchain Inc., a crypto company backed by “Shark Tank” star Kevin O’Leary, announced plans to build a data center at an abandoned Cold War-era radar base near Nekoma (home of the famous Nekoma Pyramid). According to a news release from Burgum’s office, the company also planned to move its North American headquarters to North Dakota.

The plan is for the company to build several data centers in North Dakota, with a total investment of nearly $1 billion.

According to Burgum’s office, none of these projects sought any public money beyond certain tax credits and incentives that are already in place and available to any business. A facility built near Ellendale by Applied Blockchain also does not appear to accept any public subsidies.

But the state, and a local government, did put public money on the line for a crypto data center in Grand Forks, and right now it looks like a bad bet.

In 2021, the city of Grand Forks approved a $269,000 low-interest PACE loan, which went along with a $500,000 grant from the state-owned Bank of North Dakota, for a roughly $100 million data center being built in their community to be made by Texas-based Core Scientific Inc. That data center has been completed and is currently operational.

But thanks to the collapse of the crypto industry, Core Scientific is in dire financial straits. The company “warned of a bankruptcy filing last month, saying it would miss key debt payments,” the Minneapolis Star Tribune reported last week.

“In the event of a bankruptcy proceeding or insolvency, or restructuring of our capital structure, holders of the company’s common stock could suffer a total loss of their investment,” the company said in a filing with the SEC in October.

Shares of the company traded as low as $0.13 in November, down from about $12 a share last November, according to the Star Tribune report.

To be clear, these projects are set up with cryptocurrency mining — basically, computers solving math problems to create cryptocurrency — which is only part of the use of the data centers. They can also be used for other things, such as data storage. How important Cyrpto is varies from project to project.

ABM installation at Nekoma
The so-called “Nekoma Pyramid,” a Cold War-era radar facility that was recently sold to a cryptocurrency business that plans to use the property for a data center and crypto-mining.

Eric Hylden / Forum News Service

Still, crypto has been one of the bigger puzzle pieces in these projects, and given the state of that industry, it’s not entirely clear what the future holds for these investments.

Kevin Lund, president and CEO of the Grand Forks Region Economic Development Corp., and someone who has worked to bring the company to his community, told me he spoke with representatives from Core Scientific about three weeks ago. He said that while they “recognize stress in the industry,” their Grand Forks facility is “one of their best” and there are no plans for disruption to its operations.

Burgum spokesman Mike Nowatzki told me their office hasn’t heard any updates on possible backlash from the crypto industry crash on the North Dakota projects, but referred me to Commerce Commissioner Josh Teigen.

Teigen said the four crypto data centers either operating in North Dakota or in the process of being built all have components of traditional data centers. He also said that he checked in with them, and that none of them had any direct exposure to the FTX collapse, although he acknowledged that the fallout from that situation hurt their industry overall.

Can any of these projects be cancelled? “We haven’t heard of any development changes yet,” Teigen told me.

window.fbAsyncInit = function() FB.init(

appId : '609251773492423',

xfbml : true, version : 'v2.9' ); ;

(function(d, s, id) var js, fjs = d.getElementsByTagName(s)[0]; if (d.getElementById(id)) return; js = d.createElement(s); js.id = id; js.src = "https://connect.facebook.net/en_US/sdk.js"; fjs.parentNode.insertBefore(js, fjs); (document, 'script', 'facebook-jssdk'));

Related Posts