Celsius chooses NovaWulf’s bid to exit bankruptcy

Bankruptcy lender Celsius Network has chosen NovaWulf Digital Management as a sponsor for its proposed Chapter 11 restructuring plan that would see the investment advisory firm take over operations into a new company, with most clients expected to get back up to 70% of their funds.

Celsius presented the plan on February 15 in a filing with the United States Bankruptcy Court for the Southern District of New York. The proposed plan has the support of the Celsius Official Committee of Unsecured Creditors (UCC) – a body representing the interests of Celsius account holders.

The plan involves the creation of a new public platform fully owned by Earn creditors called NewCo with UCC appointing the majority of the company’s directors. The plan notes that the new board will have no “involvement or relationship with the Celsius founder.”

NovaWulf will also make a direct cash contribution of between $45 million to $55 million to the new firm.

In the filing, Celsius said that “the NovaWulf plan provides the best method for distributing the debtors’ liquid crypto assets and maximizing the value of the debtors’ illiquid assets through a new company run by experienced asset managers.”

The new company will house Celsius’ illiquid assets, mining operations and existing loan portfolio with future plans to develop crypto-oriented services.

Under the plan, creditors with claims worth $5,000 and below on the petition date will be placed in a “convenience class” and receive “a one-time distribution of liquid crypto” paid in the form of Bitcoin (BTC), Ether (ETH) and USD Coin (USDC ).

It is estimated that the option will give over 85% of Celsius customers around 70% recovery of their deposited crypto. Any Earn creditor with a balance over $5,000 may elect to reduce a claim to $5,000 and join the class.

Those with a claim over $5,000 – or those with a claim over $1,000 who opt out of the Convenience Class shares – will receive a payout of remaining crypto after the payments to smaller accounts.

In addition, they will receive ownership in NewCo through equity and management shares that will pay dividends to the owners.

Earn users who hold Celsius (CEL) tokens, a built-in token used for user rewards currently trading around $0.50, will be valued and purchased at the initial coin offering (ICO) price of $0.20.

The plan would see “insider CEL token claims,” ​​or the buyers who gained early ICO access, “get no recovery.”

The plan also calls for the creation of a “well-funded litigation trust” to pursue lawsuits against Celsius executives and former CEO Alex Mashinsky.

The proposed plan will need approval from U.S. Bankruptcy Judge Martin Glenn before it can be enacted.

Six firms submitted bids for Celsius crypto assets, including Binance, Bank To The Future, Cumberland DRW and Galaxy Digital from a process in which Celsius contacted “over 130 parties.”

The company filed for Chapter 11 bankruptcy in July 2022, after halting withdrawals citing “extreme market conditions” and rumors of insolvency.