Celsius chooses NovaWulf’s bid to exit from bankruptcy

Bankrupt crypto lender Celsius Network has chosen NovaWulf Digital Management as a sponsor of its proposed Chapter 11 restructuring plan, which will see the investment advisory firm take over operations of a new company, and most clients they estimate to recover up to 70% of their funds.

Celsius introduced the plan on February 15 in a filing with the United States Bankruptcy Court for the Southern District of New York. The proposed plan is supported by Celsius' Official Committee of Unsecured Creditors (UCC), a body that represents the interests of Celsius account holders.

The plan calls for the creation of a new public platform wholly owned by Earn's creditors called NewCo with the UCC appointing a majority of the company's board of directors. The plan notes that the new board will have "no Celsius founder involvement or relationship."

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

1-Last night, Celsius (with UCC support) selected NovaWulf to sponsor a reorganization plan that will distribute liquid cryptocurrency to all account holders, as well as create a litigation trust and provide creditors with common equity in a NewCo that owns illiquid assets such as mining.

— Celsius Official Committee of Unsecured Creditors (@CelsiusUcc) February 15, 2023

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 led by experienced asset managers.”

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

Under the plan, creditors with claims valued at $5,000 or less 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 currency (USDC).

The option is estimated to provide more than 85% of Celsius clients with a recovery of around 70% of their deposited cryptocurrencies. Any Earn creditor with a balance of more than $5,000 may choose to reduce a claim to $5,000 and participate in the class.

Those with a claim of more than $5,000, or those with a claim of more than $1,000 who opt out of the Convenience Class actions, will receive a payment of the residual crypto after payments to smaller accounts.

Additionally, they will receive ownership of NewCo via equity and management share tokens that will pay dividends to holders.

Win users who have Celsius (HE), a native token used for user rewards and currently trading around $0.50, will be priced and bought at the initial coin offering (ICO) price of $0.20.

The plan would see “insider CEL token claims,” or those buyers granted early ICO access, “receive no recovery.”

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

The proposed plan will need the approval of US Bankruptcy Judge Martin Glenn before it can be enacted.

six signatures bid for Celsius crypto assetsincluding Binance, Bank To The Future, Cumberland DRW, and Galaxy Digital from a process in which Celsius contacted “more than 130 parties.”

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