Crypto lenders such as Celsius boomed during the COVID-19 pandemic, drawing customers with the promise of high interest rates on their cryptocurrency deposits and the ability to borrow against their crypto assets. But many companies in the highly interconnected sector went bankrupt in 2022, driven by a market crash in May and the November implosion of a major crypto exchange, FTX. Under the plan, Celsius customers with less than $5,000 in their accounts will be eligible to receive a one-time payment in bitcoin, Etherium or the stablecoin USDC, according to court documents filed on Wednesday. Celsius estimates that option will be available to more than 85% of its customers, providing them with about 70% of the value of their deposits.
Celsius customers with more than $5,000 in their accounts would receive payments from crypto that is left over after smaller customer accounts have been paid back, and will additionally receive ownership shares in the new company. NovaWulf has agreed to pay up to $55 million to the reorganized company, called "NewCo" by Celsius, which will be owned by Celsius creditors and will continue Celsius' bitcoin mining and loan businesses. NovaWulf will share in the new business' profit, Kwasteniet said.
The new company would also pursue litigation stemming from Celsius' collapse, including claims against former CEO Alex Mashinsky and other insiders.
Celsius creditors previewed their legal claims against Mashinsky and other insiders in a late Tuesday court filing, accusing them of withdrawing millions of dollars from Celsius as it collapsed and causing billions in losses through their "negligent, reckless, and self-interested" actions.
The creditors' legal claims echo many of the findings of an independent bankruptcy examiner, who reported on Jan. 31 that Celsius used investor money and customer deposits to prop up its own token while two of its founders made millions of dollars from token sales. New York's attorney general has already sued Mashinsky for alleged fraud carried out during his time leading Celsius. Mashinsky could not immediately be reached for comment on Wednesday. An attorney representing him has said previously that he denies the allegations and looks forward to vigorously defending himself in court. Any proceeds from the post-bankruptcy litigation would benefit the Celsius customers who take an ownership stake in NewCo, Kwasteniet said.
New Jersey-based Celsius filed for U.S. bankruptcy in July
after freezing customer withdrawals. Celsius said at the time
that it had more than 1.7 million registered users and
approximately 300,000 active users with account balances greater
than $100.
(Reporting by Dietrich Knauth in New York
Editing by Alexia Garamfalvi and Matthew Lewis)
