The crypto lender Celsius Network has selected NovaWulf Digital Management as the sponsor for its planned Chapter 11 restructuring plan, which will see the investment advising business take over the operations of a new company and the recovery of up to 70% of its funds.
Celsius submitted the plan to the United States Bankruptcy Court for the Southern District of New York on February 15. The idea is supported by the Celsius Official Committee of Unsecured Creditors (UCC) – an organisation that represents the account holders of Celsius.
The plan calls for establishing NewCo, a new public platform wholly owned by Earn’s creditors, with the UCC appointing the majority of NewCo’s board members. The proposal states that there will be no founder participation or relationship with the new board.
NovaWulf will also provide the new company with between $45 million and $55 million in direct cash.
1-Last night Celsius (with UCC support) selected NovaWulf to sponsor a reorganization plan that will distribute liquid crypto to all account holders, as well as create a litigation trust and provide creditors with common equity in a NewCo holding illiquid assets like mining.
— Celsius Official Committee of Unsecured Creditors (@CelsiusUcc) February 15, 2023
Celsius stated in the petition that the NovaWulf plan provides the best approach to divide the Debtors’ liquid crypto assets and maximise the value of the Debtors’ illiquid assets via a new firm managed by professional asset managers.
The new firm would hold Celsius’ illiquid assets, mining operation, and existing loan portfolio, with intentions to expand crypto-centric services in the future.
Creditors with claims valued at $5,000 or less on the petition date will be put in the Convenience Class and get a one-time distribution of liquid crypto paid in Bitcoin. The option will offer over 85% of Celsius consumers over 70% of their deposited crypto. Any Earn creditor with a sum greater than $5,000 can decrease a claim to $5,000 to join the class.
Those with a claim greater than $5,000 — or those with a claim greater than $1,000 who opt out of Convenience Class shares — will receive a payout of the remaining cryptocurrency after distributing funds to smaller accounts.
Besides, they will own NewCo through equity and management share tokens that generate dividends.
Customers who own Celsius tokens, a native currency used for user incentives that trade for around $0.50, will be valued and acquired at the initial coin offering (ICO) price of $0.20.
According to the plan, “insider CEL token claims” or those buyers allowed early ICO access would not be reimbursed. The proposal also calls for establishing a well-funded litigation trust to take legal action against Celsius’s executives and former CEO Alex Mashinsky.
Before the proposed plan can be implemented, it must be approved by U.S. Bankruptcy Judge Martin Glenn. Six organisations, including Binance, Bank To The Future, Cumberland DRW, and Galaxy Digital, submitted offers for Celsius crypto assets following a process in which Celsius contacted “over 130 stakeholders.”
In July 2022, the firm filed for Chapter 11 bankruptcy after stopping withdrawals due to extreme market circumstances and reports of collapse.