NovaWulf Digital Management was selected as the sponsor by Celsius Network, a bankrupt cryptocurrency lender. The plan will see the investment advisory firm assume operations of the new company if it is successful. Customers are expected to recover as much as 70% of their funds.
On February 15, Celsius submitted the proposal to the United States Bankruptcy Court in the Southern District of New York as part of a file. The proposal was approved by the Celsius Official Committee of Unsecured Creditors, which represents the interests of Celsius account holders.
Earn’s creditors would own the entire NewCo platform. The majority of NewCo’s board members will be appointed by the UCC. The idea is that the new board will have no “Celsius founding involvement or affiliation.”
NovaWulf will also make a financial contribution to the new company, in the range $45 million to $55 millions.
Celsius stated in the document, “The NovaWulf Plan provides the best method for Debtors to distribute their liquid crypto assets and maximize Debtors illiquid assets through an experienced company run by asset managers.” This was to refer to the NovaWulf’s ability distribute liquid assets and maximize illiquid assets.
All illiquid assets, mining activity and the current loan portfolio of Celsius will be transferred to the new company, which has plans to offer crypto-oriented service in the near future.
The proposal states that creditors with claims less than $5,000 as of the date the petition was filed will be placed into a “Convenience class” and will be eligible for a “one-time distribution of liquid cryptocurrency.” This distribution will take the form of Bitcoin (BTC), Ether(ETH) and USD Coin (USDC).
The option will enable over 85% Celsius’s clients to recover more than 70% of their cryptocurrency investments. Earn creditors with debts greater than $5,000 can choose to reduce their claim to $5,000 so they can take part in this class.
If you have more than $5,000 in claims or if you have over $1,000 claims but do not want to take part in the Convenience Class Shares, then you will be eligible for a payout of the cryptocurrency left over from smaller accounts.
They will also be able to own NewCo through equity and management tokens. This will allow them to collect dividends.
Earn users who own Celsius (CEL), a native token for user rewards, will have their tokens valued. They can then be purchased at the initial coin listing (ICO) price $0.20. Earn users who don’t hold Celsius tokens (CEL tokens) will not have their tokens evaluated or purchased.
The proposal states that “insider CEL tokens claims,” also known to customers who had early access to the ICO “would not be reimbursed.”
Additionally, the proposal calls to establish a “well-funded lawsuit trust” to bring legal action against Celsius officials including Alex Mashinsky (the company’s former CEO).
Before any proposed strategy can take effect, it must be approved by Martin Glenn (United States Bankruptcy Judge).
Following a process that saw Celsius contact “over 130 people”, six companies including Galaxy Digital, Bank To The Future and Cumberland DRW submitted offers to acquire the crypto assets of the company.
After suspending withdrawals in July 2022 due to “severe markets circumstances”, the company decided to file for Chapter 11 bankruptcy protection within the same month.