Celsius files plan; requests May 17 disclosure statement hearing

By Sarah Lizee

Olympia, Wash., April 3 – Celsius Network LLC filed a Chapter 11 plan of reorganization with the U.S. Bankruptcy Court for the Southern District of New York on Friday.

The company is seeking a May 17 hearing on approval of the disclosure statement.

As previously reported, the company entered into an agreement under which NovaWulf Digital Management, LP is the proposed sponsor of the plan. NovaWulf was founded in 2022 by former Blackstone, King Street and Beowulf Energy executives.

The company said Friday that the key terms of the deal remain substantially unchanged and are embodied in the plan.

Last week, the court approved the debtors’ motion to provide bid protections for NovaWolf. The current deadline for other parties to submit competing bids to sponsor a plan of reorganization or another transaction is April 17.

As currently proposed, the plan provides for the distribution of a significant amount of the debtors’ liquid cryptocurrency to account holders on the effective date of the plan, and creation of a new public-reporting, regulatorily compliant entity (NewCo) that will manage the debtors’ illiquid assets (including the mining business, retail and institutional loan portfolios, staked cryptocurrency, and other alternative investments) and whose common equity will be 100% owned by creditors at emergence.

Certain claims and causes of action of the debtors will be preserved and pursued by a litigation administrator for the benefit of general Earn creditors.

Distributions will be funded with cash on hand, including from Novawulf’s $45 million management contribution and net proceeds from the sale of the GK8 assets; available cryptocurrency; the equity share tokens and management share tokens; and litigation proceeds.

Under the plan, convenience claims are defined as account holders claims (excluding Custody and retail borrower deposit claims) valued at more than $10 but less than or equal to $5,000. Holders of convenience claims will receive liquid cryptocurrency for an at least 70% recovery on their claims. Holders of claims valued at below $5,000 but at or above $1,000 can opt out of this class and receive general Earn claim treatment below. Holders of claims valued at more than $5,000 can elect to have their claims reduced to $5,000 and be treated as convenience claims.

Holders of general Earn claims will receive their pro rata share of liquid cryptocurrency, equity share tokens and management share tokens reflecting common and preferred equity in the NewCo, and proceeds form the litigation of recovery causes of action.

Elections for Earn claimholders to receive more tokens would result in an account holder receiving a 30% premium in tokens when compared to the amount of liquid cryptocurrency they would otherwise receive. Elections to receive more liquid cryptocurrency would result in an account holder receiving a 30% discount in liquid cryptocurrency when compared to the tokens that account holder would otherwise receive.

Custody claims that the court previously authorized to be withdrawn may continue to be withdrawn in full. All other holders of Custody claims will have the opportunity to either opt into the Custody settlement through the plan or have the cryptocurrency associated with their claim reserved in a separate wallet pending resolution of any causes of action against the account holder.

Holders of custody claims that opt into the settlement will receive a 72.5% recovery and a release of all causes of action against them. They will forfeit any right to the remaining 27.5% of their claim.

Any settlement participant that isn’t an excluded party and that has withdrawal preference exposure under $100,000 will receive a 100% recovery as a result of the account holder avoidance action release.

The treatment of withhold claims depends on how the class votes on the plan. If the class votes to accept the plan, holders will receive 15% of their claims through a distribution of in-kind currency, and the remaining 85% will be treated as a general Earn claim. If the class votes to reject the plan, each holder will have 100% of their claim treated as an Earn claim.

Holders of retail borrower deposit claims that vote in favor of the plan, elect to opt into the retail borrower deposit claim settlement, are not excluded parties and hold retail borrower deposit claims valued over $5,000 (not including any claims on account of CEL tokens, FTT tokens or LUNC tokens), will have the opportunity to enter into a settlement that will allow the electing retail borrower to ultimately recovery up to the entire amount of their claim over a six-year period.

All other holders of retail borrower deposit claims, either by election or default, will have their claims set off against their outstanding obligations to the debtors and have any remaining retail borrower deposit claims treated as general Earn claims.

As detailed above, account holders will have various elections and options depending on which class they are in. Those elections will take place as part of voting on the plan.

Holders of other secured claims and other priority claims are unimpaired.

Holders of unsecured loan claims will receive a combination of cash, equity share tokens and management share tokens sufficient to provide a recovery at the midpoint of the general Earn claim class recovery.

Holders of general unsecured claims will also receive a combination of cash, equity share tokens and management share tokens sufficient to provide a recovery at the midpoint of the general Earn claim class recovery.

Intercompany claims and interests will be reinstated or set off, settled, distributed, addressed, converted to equity, contributed, canceled or released.

Holders of preferred equity interests, common interests, section 510(b) claims and equitably subordinated claims will receive nothing under the plan.

The Hoboken, N.J.-based cryptocurrency lending platform filed bankruptcy on July 13, 2022 under Chapter 11 case number 22-10964.

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