The insolvent cryptocurrency lender Celsius Network has selected NovaWulf Digital Management as the sponsor for its proposed Chapter 11 restructuring plan. If the plan is successful, the investment advisory firm will assume operations of a new company, and the majority of customers are expected to recover up to 70 percent of their funds.
Celsius presented the proposal to the United States Bankruptcy Court for the Southern District of New York on February 15 as part of a filing. The Celsius Official Committee of Unsecured Creditors (UCC), which is an organization that represents the interests of Celsius account holders, has given its approval to the proposal that has been submitted.
The proposal calls for the establishment of a new public platform known as NewCo, which would be held in its entirety by Earn’s creditors. The UCC will be responsible for the appointment of the majority of NewCo’s board members. According to the idea, the reconstituted board will not have any “Celsius founding engagement or affiliation.”
In addition, NovaWulf will provide a direct financial contribution to the newly formed company in the range of $45 million to $55 million.
Celsius stated in the document that “the NovaWulf plan provides the best method to distribute the Debtors’ liquid crypto assets and maximize the value of the Debtors’ illiquid assets through a new company run by experienced asset managers.” This was in reference to the NovaWulf plan’s ability to distribute liquid assets and maximize the value of illiquid assets.
The illiquid assets, mining activity, and current loan portfolio of Celsius will all be moved into the new firm, which also has intentions to offer crypto-oriented services in the near future.
According to the proposal, creditors whose claims had a value of $5,000 or less as of the date of the petition will be placed in a “Convenience Class” and will be eligible to receive “a one-time distribution of liquid crypto.” This distribution will be paid in the form of Bitcoin (BTC), Ether (ETH), and USD Coin (USDC).
It is anticipated that the option will allow over 85% of Celsius’s clients to reclaim over 70% of the cryptocurrency that they have invested. It is possible for any Earn creditor with a debt more than $5,000 to choose to lower a claim to $5,000 in order to take part in the class.
Those who have claims worth more than $5,000, or those who have claims worth over $1,000 but choose not to participate in the Convenience Class shares, will be eligible to receive a payout of the cryptocurrency that is left over after smaller accounts have been compensated.
In addition to this, they will get ownership in NewCo in the form of equity and management share tokens, which will entitle its holders to collect dividends.
Earn users who hold Celsius (CEL) tokens, a native token used for user rewards that currently trades around $0.50, will have their tokens valued and purchased at the initial coin offering (ICO) price of $0.20. Earn users who do not hold Celsius (CEL) tokens will not have their tokens valued or purchased.
According to the proposal, “insider CEL token claims,” also known as the customers who were provided early access to the ICO, “would get no reimbursement.”
In addition, the proposal calls for the establishment of a “well-funded litigation trust” in order to take legal action against officials at Celsius, including the company’s previous CEO Alex Mashinsky.
Before the proposed strategy can be put into action, it must first have the blessing of the United States Bankruptcy Judge Martin Glenn.
Following a process in which Celsius contacted “over 130 parties,” a total of six companies, including Binance, Bank To The Future, Cumberland DRW, and Galaxy Digital, submitted offers for the company’s crypto assets.
After ceasing withdrawals in July 2022 and claiming “severe market circumstances” as the reason, the business ultimately decided to file for Chapter 11 bankruptcy protection the same month.