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

Thanks to turmoil at FTX, a high-profile cryptocurrency exchange, that industry is in free fall. What does it mean for crypto-related data center projects here in North Dakota?

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Gov. Doug Burgum, left, speaks with FX Solutions's Richard Tabish and Atlas Power's Kevin Washington at an event debuting plans for the Williston, North Dakota, data center on Wednesday, Jan. 26, 2022.
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MINOT, N.D. — At the national level, we've all been watching the stunning collapse of the cryptocurrency industry, headlined by the implosion of FTX, one of the companies led by erstwhile billionaire Samuel Bankman-Fried .

FTX was a crypto exchange that allowed customers to transfer their wealth among various digital and traditional currencies. But, per reports, it turns out FTX was loaning its customer's money (without their permission) to a sister company that was, in turn, using it to make risky investments. It was a house of cards, basically, and when it collapsed, the reverberations impacted the entire crypto industry.

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

It's a stunning turn of events, but what does it mean for North Dakota, specifically?

Gov. Doug Burgum has touted a couple of 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 into a crypto mining data center — possibly the world's largest — in the Williston area.

Burgum headlined the announcement, which also made news due to the lurid background of one of the businessmen involved .

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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 ). Per 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 multiple data centers in North Dakota, with a total investment of nearly $1 billion.

Per Burgum's office , neither of these projects have 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 doesn't seem to have accepted 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 as of right now it's looking like a bad bet.

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

But thanks in no small part to the crypto industry collapse, Core Scientific is in tough financial condition. 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 have been trading as low as $0.13 in November, down from about $12 per share last November, per the Star Tribune report.

To be clear, these projects were pitched with cryptocurrency mining — basically, computers solving math problems to create cryptocurrency — being only a part of the use of the data centers. They can be used for other things too, 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 crypto currency business that plans to use the property for a data center and crypto mining.
Eric Hylden / Forum News Service

Still, crypto was one of the larger puzzle pieces in these projects, and given the state of that industry, it's not entirely clear what the future of these investments is.

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

Burgum spokesman Mike Nowatzki told me their office hasn't heard any updates on potential blowback from the crypto industry collapse on the North Dakota projects, but directed me to Commerce Commissioner Josh Teigen.

Teigen said that 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's checked in with them, and that none of them had any direct exposure to the FTX collapse, though he admitted that the fallout from that situation has hurt their industry overall.

Could any of these projects be canceled? "We've not heard of any development changes," Teigen told me.

Opinion by Rob Port
Rob Port is a news reporter, columnist, and podcast host for the Forum News Service. He has an extensive background in investigations and public records. He has covered political events in North Dakota and the upper Midwest for two decades. Reach him at Click here to subscribe to his Plain Talk podcast.
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