To emerge from Chapter 11 bankruptcy, Celsius Network LLC has entered into an acquisition deal with NovaWulf Digital Management. The announcement (1) was made yesterday that Celsius had chosen the digital asset company to sponsor its proposed Chapter 11 restructuring scheme.
In addition, the bankrupt cryptocurrency lender accepted NovaWulf's takeover plan after evaluating several other potential buyers' proposals.
As part of the deal, NovaWulf will take control of a newly formed firm responsible for collecting outstanding debts. Most creditors will get a one-time payment in cryptocurrency if the Celsius proposal is implemented, and NovaWulf would also make a sizeable contribution in a direct cash payment.
According to the strategy, the digital asset company would invest between $45 million and $55 million in the newly formed business.
Celsius proposed that those creditors who had filed the most important claims should be awarded stock in the newly formed corporation. Ultimately, up to seventy percent of the customers' monies would be returned to them.
The Celsius Creditors Committee Approved the Plan
Yesterday, Celsius provided the United States Bankruptcy Court with the plan for its purchase agreement with NovaWulf. The Celsius creditors group has already expressed their approval for the proposed strategy, which aims to end the high-profile bankruptcy process that the company is going through.
This organization, more formally known as the Celsius Official Committee of Unsecured Creditors (UCC), is responsible for representing the account holders of Celsius.
Celsius released a statement explaining that Celsius' creditors conceived the sale and reorganization plan. In addition, the troubled cryptocurrency lender stated that there would be "no Celsius founder engagement or contact" between the new company and Celsius. Celsius provided the following explanation when asked about NovaWulf's participation in the suggested organizational reorganization:
"The Debtors think that the NovaWulf plan is the most efficient process to disperse the Debtors' liquid crypto assets and increase the value of the Debtors' illiquid assets thru a new firm run by seasoned asset managers."
The progression of the new firm held by Earn's creditors was likewise summarized by Celsius' Official Committee of Unsecured Creditors.
Earn accounts are cryptocurrency wallets that pay consumers interest on crypto they have leased out. According to the UCC:
"Last night Celsius (with UCC support) picked NovaWulf to endorse a restructuring plan that will disperse liquid crypto to all customer accounts, as well as establish a lawsuit trust, as well as provide creditors with equity capital in a NewCo holding illiquid assets like mining," according to the press release.
In addition, the proposal for the reorganization disclosed that UCC would be responsible for appointing the majority of NewCo's board members. The deal Celsius entered into to acquire the company stipulates that the newly formed company will assume custody of Celsius' mining business, current loan portfolio, and illiquid assets to develop crypto-oriented services.
Moreover, NewCo would protect creditors from the considerable costs of liquidating client assets and the company itself.
Breakdown of Payments to Creditors
Creditors whose claims total less than $5,000 will be moved into a "Convenience Class" under the terms of the new plan, and they will be eligible to receive a one-time distribution of liquid crypto assets. Bitcoin (BTC), Ether (ETH), and a stable cryptocurrency called USD Coin are all acceptable forms of payment (USDC).
Creditors who owe more than $5,000 and those with a claim of at least $1,000 but choose not to participate in the Convenience Class share offering will be eligible to receive a piece of the residual cryptocurrency. After the payments had been made to the more minor accounts, the total sum owed would be calculated.