Rhodium Encore: Riot Settlement Drives Liquidation Plan

Rhodium Encore, a Texas bitcoin-mining operator, entered chapter 11 in the U.S. Bankruptcy Court for the Southern District of Texas after disputes with Whinstone and Riot over power access, hosting economics, and energy credits. The Voluntary Petition opened the lead case on August 24, 2024, and the debtors' First Day Declaration said the business had only about $2.49 million of liquidity left even though it had built major infrastructure at Rockdale and Temple. The declaration attributed the liquidity collapse to Whinstone's power cutoff, roughly $67 million in unpaid energy credits, heavy litigation expense, weather-related disruption at Temple, and the inability to close a proposed $105 million asset sale while litigation risk remained unresolved.

Rhodium used cash collateral to fund operations, sold its Temple lease position, settled with Riot and Whinstone for $185 million, and confirmed a liquidating plan on December 19, 2025. The plan went effective on January 14, 2026.

Debtor	Rhodium Encore LLC and affiliated debtors
Court	U.S. Bankruptcy Court, Southern District of Texas
Case Number	24-90448
Petition Date	August 24, 2024
Confirmation Date	December 19, 2025
Effective Date	January 14, 2026
Judge	Hon. Alfredo R. Perez
Settlement Value	$185 million

Whinstone Power Cutoff and Path to Filing

Rhodium operated bitcoin-mining infrastructure in Rockdale and Temple, Texas. The First Day Declaration described the company as a low-cost, reliable miner before the filing and said it had invested more than $150 million in custom Rockdale infrastructure, controlled approximately 125 megawatts and roughly 2.8 exahashes per second of hash rate there, and had another 102.5 megawatts and approximately 2.7 exahashes per second of hash rate at Temple, where it also hosted third-party miners.

The debtors' relationship with Whinstone deteriorated after Riot acquired Whinstone. Whinstone cut power at Rockdale in November 2023, escalating a dispute over hosting contracts and energy economics that later carried into the bankruptcy case. By the petition date, the declaration said Whinstone had caused at least $9 million of lost revenue and damage and had failed to pay about $67 million of energy credits that Rhodium believed it was owed. The declaration also tied distress to weather-related disruption at Temple and the inability to close a proposed $105 million sale because litigation risk remained unresolved.

The debtors said the company had defaulted on debt and could not monetize assets outside of chapter 11. The Miner Mag's filing-day coverage described the chapter 11 filing as following missed loan maturities and a failed effort to monetize the Temple site. Inside the case, Rhodium later sued Riot and Whinstone for more than $300 million, tying the litigation directly to withheld power and breach-of-contract allegations.

Cash Collateral, Secured Debt, and SAFE Obligations

Rhodium's early financing path centered on cash collateral rather than a DIP loan. The Cash Collateral Motion asked for authority to use collateral proceeds under a 13-week budget to cover payroll, trade claims, ordinary-course expenses, and chapter 11 administration while the debtors tried to preserve operating value. The motion proposed strict budget compliance, reporting obligations, and adequate protection liens for the prepetition secured parties. The secured creditor group consisted of the holders of the Rhodium 2.0 secured notes, Rhodium Encore secured notes, and Rhodium Technologies exchanged secured notes.

The Final Cash Collateral Order authorized use of cash collateral only under the approved budget and granted the prepetition secured parties postpetition adequate-protection liens that were junior to DIP liens and prior permitted liens but senior to other liens, subject to a court-approved carve-out. The order also limited surcharge rights under section 506(c) absent consent and gave the secured parties monitoring access to books, records, and other reporting required under the financing documents.

The First Day Declaration broke out approximately $64.17 million of secured note debt across the principal debtor entities: about $22.155 million at Rhodium Encore LLC, about $25.114 million at Rhodium 2.0 LLC, and about $16.899 million at Rhodium Technologies LLC. Beyond the secured notes, the declaration described another $87 million of SIMPLE Agreements for Future Equity, which later became central to class-treatment fights in the plan process as the court ultimately determined that SAFE obligations are claims rather than equity interests.

Sale Process and Riot Settlement

The case initially moved toward asset sales. The debtors filed a Bidding Procedures Motion establishing a stalking-horse and auction framework for a portion of the estate's assets, and in September 2024 the court entered the Bidding Procedures Order approving that structure. The order gave potential bidders a fair opportunity to participate and was designed to maximize value for creditors and stakeholders.

The auction produced a Temple transaction: the Temple Sale Order approved the sale of the Temple lease and related transferred assets to Temple Green Data, LLC. The Miner Mag reported a $40.6 million closing, including a $35 million purchase price and return of a $5.6 million security deposit. The same report said Rhodium used Temple-sale proceeds to repay Galaxy debt after drawing $15 million of a $30 million Galaxy facility during the case.

By March 2025, the case pivoted to a broader settlement. The Settlement Motion asked the court to approve a transaction with Whinstone, Riot Platforms, and Imperium that would resolve the core operating and litigation disputes over power agreements, related contracts, and ongoing litigation. The motion described the consideration as $129.9 million in cash, return of a $6.1 million security deposit, and $49 million in Riot stock priced from a ten-day VWAP before closing, totaling $185 million. The settlement would dismiss pending litigation with prejudice, transfer specified Rockdale tangible assets plus a limited IP license to Riot, and preserve enough value to support full creditor recoveries and a meaningful distribution for equity. The court approved the settlement in April 2025.

Riot announced the closing on April 28, 2025, stating it acquired Rhodium property at the Rockdale facility, assumed 125 megawatts of power capacity, and ended the legacy hosting contracts.

Liquidating Plan and SAFE Waterfall

The Second Amended Joint Chapter 11 Plan of Liquidation set out a wind-down structure built around the court's determination that the $87 million of SAFE obligations are claims, not equity interests. That ruling directed the majority of estate value to Class 6 SAFE Claims, which the plan treated as senior in recovery priority to Class 10 common interests and Class 11 Imperium interests.

The Confirmation Order approved that plan on December 19, 2025. The order treated Classes 1, 2, 3, 4, 5(a), 5(b), 7, 8, and 9 as unimpaired, while identifying SAFE Claims (Class 6), common interests (Class 10), Imperium interests (Class 11), and intercompany interests (Class 12) as impaired classes in the voting structure. The plan documents directed the estate's remaining value into a liquidation waterfall that placed Class 6 SAFE Claims ahead of Class 10 and Class 11 interests. The confirmation order also approved the plan's injunctions, exculpations, releases, indemnifications, and settlements as integral to implementation of the liquidation structure.

The Plan Supplement Notice identified GXD Labs, a wholly owned subsidiary of Atlas Grove Partners, as plan administrator for the wind-down debtor. GXD Labs serves as the sole director and sole officer of the wind-down debtor and holds broad authority to administer assets, make distributions, and implement the plan. The Effective Date Notice fixed the plan's effective date at January 14, 2026, set an administrative expense bar date of February 13, 2026 at 5:00 p.m. Central, and provided that rejection damages claims would be due on the later of thirty days after the relevant rejection order, rejection effective date, or the effective date.

Professional Retentions and Wind-Down Transition

The Disclosure Statement identified Quinn Emanuel as debtors' counsel, Province as financial advisor, B. Riley Securities as financial advisor and investment banker, and McDermott Will & Emery as committee counsel. The filing also listed Stris & Maher and Lehotsky Keller Cohn as special litigation counsel, Barnes & Thornburg as special committee counsel, BDO USA as special committee financial advisor, and Genesis Credit Partners as committee financial advisor.

Fee disputes. On December 24, 2025, the court entered a final compensation order for Lehotsky Keller Cohn LLP allowing $11,671,994.33 in compensation and expenses, with $7,630,460.98 authorized for unpaid disbursement. The fee award became the subject of post-confirmation litigation: Bloomberg Law reported that Rhodium's former bankruptcy counsel sought sanctions against the board committee and Barnes & Thornburg over the fee dispute, alleging frivolous attacks on the award. The sanctions fight drew coverage into March 2026 as former directors and attorneys opposed the sanctions bid.

Leadership transition. The Miner Mag reported in December 2024 that co-CEO Nathan Nichols planned to step down after the new year. With the plan effective, GXD Labs assumed operational control of the wind-down debtor.

Frequently Asked Questions

When did Rhodium Encore file bankruptcy? Rhodium Encore filed chapter 11 on August 24, 2024 in the U.S. Bankruptcy Court for the Southern District of Texas under Case No. 24-90448.

Did Rhodium get DIP financing? The case relied primarily on cash collateral. The debtors sought authority to use cash collateral under a 13-week budget, and the court approved that structure in the Final Cash Collateral Order. The Miner Mag reported that Rhodium drew $15 million of a $30 million Galaxy facility before repaying it from Temple-sale proceeds.

What happened to Rhodium's dispute with Riot and Whinstone? The dispute ended through the $185 million transaction laid out in the Settlement Motion and later announced as closed by Riot. The consideration consisted of $129.9 million in cash, return of a $6.1 million security deposit, and $49 million in Riot stock. The parties agreed to dismiss ongoing litigation with prejudice and release future claims connected to the transaction.

Were the SAFE obligations treated as debt or equity? The court determined that the $87 million of SAFE obligations are claims, not equity interests. The confirmed plan placed Class 6 SAFE Claims ahead of common and Imperium equity positions in the liquidation waterfall.

Was Rhodium's plan a reorganization or a liquidation? It was a liquidation. The confirmed plan and effective-date notice moved the estates into a wind-down structure administered by GXD Labs, a wholly owned subsidiary of Atlas Grove Partners, which serves as plan administrator.

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