Failed crypto lender Celsius Network has selected NovaWulf Digital Management as a sponsor for its restructuring plan proposed in Chapter 11, which would see an investment advisory firm take over the new company’s operations, with most clients estimated to recover up to 70% of their funds.
Celsius introduced plan February 15, when filing a petition in the United States Bankruptcy Court for the Southern District of New York. The proposed plan has received support from the Official Celsius Unsecured Creditors’ Committee (UCC), the body representing the interests of Celsius account holders.
The plan calls for a new public platform, wholly owned by Earn’s creditors, called NewCo, with UCC appointing a majority of the company’s board members. The plan notes that the new board will have no “participation or relationship with the founder of Celsius”.
NovaWulf will also make a $45 million to $55 million direct cash contribution to the new firm.
1. Last night, Celsius (backed by UCC) chose NovaWulf to sponsor a reorganization plan that will distribute liquid cryptocurrency to all account holders, as well as create a legal trust and provide creditors with common capital in NewCo holding illiquid assets such as mining.
— Celsius Official Committee of Unsecured Creditors (@CelsiusUcc) February 15, 2023
Celsius said in a statement that “the NovaWulf plan provides the best way to allocate Debtor’s liquid crypto assets and maximize the value of Debtor’s illiquid assets through a new company managed by experienced asset managers.”
The new company will house Celsius’ illiquid assets, mining business and existing loan portfolio with future plans to develop crypto-centric services.
Under the plan, creditors with claims of $5,000 or less as of the date of the petition will be placed in a “convenience class” receiving a “one-time allocation of liquid cryptocurrency” paid out in bitcoin (BTC), ether (ETH). and US dollar coin (USDC).
This option is estimated to provide more than 85% of Celsius customers with about 70% of their deposited cryptocurrency back. Any Earn lender with a balance over $5,000 can reduce the claim to $5,000 and participate in the class.
Those claiming more than $5,000, or those who opt out of Convenience Class shares with a claim greater than $1,000, will receive a payout of the residual cryptocurrency after payments to smaller accounts.
In addition, they will gain ownership of NewCo through share tokens and management shares that will pay dividends to holders.
Earn users who hold Celsius Tokens (CEL), the native token used to reward users, currently trading at around $0.50, will be valued and purchased at an initial coin offering (ICO) price of $0.20 .
According to the plan, “insider CEL token applications” or those buyers who were granted early access to the ICO “will not receive a refund.”
The plan also calls for the creation of a “well-funded litigation trust” to pursue legal action against Celsius executives and former CEO Alex Mashinsky.
The proposed plan will require the approval of US bankruptcy judge Martin Glenn before it is passed.
Six firms have placed bids for Celsius crypto assets, including Binance, Bank To The Future, Cumberland DRW and Galaxy Digital, in a process in which Celsius contacted “more than 130 parties.”
The company filed for Chapter 11 bankruptcy in July 2022 after halting withdrawals, citing “extreme market conditions” and rumors of insolvency.
Credit : cointelegraph.com
