Celsius Selects NovaWulf To Help Felled Lender Navigate Bankruptcy

Bankrupt crypto lender Celsius has selected NovaWulf Digital Management to oversee the distribution of its liquid assets and manage illiquid holdings.

Celsius filed for bankruptcy in July after halting withdrawals the month prior, when the company cited “extreme market conditions.” The firm said at the time it intended to “put forward a plan” to get its platform up and running again. 

The company had $5.5 billion in liabilities and $4.3 billion in assets, according to previous filings — leaving it with at least a $1.2 billion shortfall.

Investment bank Centerview Partners contacted more than 130 potential bidders for Celsius’ assets, according to a Wednesday filing in the US Bankruptcy Court in the Southern District of New York.   

As a result of the fact that “most of the other bids the debtors received contemplated variations of a liquidation plan,” according to the document, creditors are of the opinion that the NovaWulf agreement “maximizes the value of the debtors’ assets.” 

The filing states that the proposal will “ultimately” bring a number of ongoing Chapter 11 cases to a “successful conclusion.” 

NovaWulf was founded in 2022 by former Blackstone, King Street and Beowulf Energy executives. The firm is focused on financing the infrastructure for digital assets, including mining data centers, lending, custody and trading operations.

“In the coming weeks, we will continue working with all stakeholders in the bankruptcy proceedings to finalize the plan with a goal of quickly, efficiently and equitably addressing creditor claims so that we can turn our attention to investing in and building upon the substantial business opportunities at stake in this matter,” a NovaWulf spokesperson told Blockworks.

Celsius and its advisers are set to finalize a binding deal with NovaWulf in the coming days, according to the filing. 

Direct cash contributions coming

NovaWulf is set to make a direct cash contribution worth between $45 million and 55 million to NewCo — a public reporting company owned by Celsius creditors — and will assume other costs associated with the liquidation of Celsius’s business.

NewCo will own and “seek to maximize the value” of Celsius’ illiquid assets, which include staked ether, mining operations, retail and institutional loans and alternative assets.

Customers of Celsius’s Earn program with claims valued below $5,000 will be placed in a “Convenience Class” that will receive a one-time distribution of liquid crypto in bitcoin, ether or USD coin, according to Wednesday’s court filing. 

Celsius estimates the distributions would provide more than 85% of Celsius’ customers with recoveries equal to roughly 70% of their claims in liquid crypto.

A Celsius spokesperson did not immediately have a comment.  

The latest filing comes after Martin Glenn, chief bankruptcy judge of the Southern District of New York, ordered Celsius in December to return $50 million of cryptoassets — a majority of which was held in interest bearing accounts — to customers.

A civil lawsuit filed by New York Attorney General Letitia James last month alleges ex-Celsius CEO Alex Mashinsky made false, misleading statements about Celsius’ safety to encourage investors to deposit digital assets onto the platform.

The suit is aiming to ban Mashinsky from doing business in New York — and require him to pay damages, restitution and disgorgement.

Mashinsky stopped working for Celsius in September.

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