Celsius Chooses Novawulf Takeover Bid

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  • Celsius has chosen Novawulf as its Chapter 11 bankruptcy sponsor
  • A new company will be formed from the ashes of Celsius, with large holders receiving equity
  • Celsius customers with smaller holdings will get up to 70% of their funds back

Novawulf Digital Management has been selected by bankrupt crypto lender Celsius Network to act as the sponsor for its proposed Chapter 11 restructuring plan. The plan, which was presented to the United States Bankruptcy Court for the Southern District of New York yesterday, will result in most creditors getting a one-time crypto payment while those with larger claims would receive equity in a new company. The Celsius Official Committee of Unsecured Creditors (UCC), which represents the interests of Celsius account holders, has endorsed the proposed plan.

UCC Has Approved Deal

Celsius filed for bankruptcy last year with a $1.2 billion deficit in its balance sheet, with retail customer digital assets making up most of its obligations. Court documents indicate that approximately 85% of its users are expected to receive back 70% of their account balances in liquid cryptocurrencies such as BTC, ETH and stablecoins, which is more than many would have been fearing when it collapsed.

The Novawulf plan involves the establishment of a new public platform, fully owned by Celsius Earn creditors, named NewCo. The UCC will appoint the majority of the company’s board members, and the new board will not have any involvement or relationship with Celsius founders. Under the bankruptcy plan, Novawulf, which was established in 2022 by former executives from investment firms such as Blackstone Group and King Street Capital Management, has committed to a direct cash injection of $45 million to $55 million into the new company.

Mashinksy and Others Targeted in Lawsuit

The news of Celsius’ agreement with Novawulf came on the same day as it was revealed that legal proceedings have commenced between Celsius and its creditors to recover millions of dollars that they claim were fraudulently transferred by the founder and former CEO, Alex Mashinsky, his wife, and other former senior executives.

According to court papers released on Tuesday, Mashinsky, co-founder S. Daniel Leon, and others are accused of mismanaging the crypto lending firm, inflating the price of CEL tokens for their own gain, and making “negligent, reckless, and occasionally self-interested investments” in the lead-up to the company’s bankruptcy.