By
Godfrey Benjamin
April 23rd, 2024
More than 600,000 Celsius creditors would be closely monitoring the auction as it likely determines subsequent payment schemes.
According to a Saturday filing by Kirkland & Ellis, the auction proceedings for bankrupt crypto lending firm Celsius Network LLC will begin on Tuesday. The document further states that the public sale of the New Jersey-based crypto lender has attracted several reputable crypto-focused companies, all interested in taking over. These include digital currency exchange Coinbase Global (NASDAQ: COIN) and privately run crypto custodian Gemini Trust.
In the filing, Kirkland & Ellis, which oversees the bankruptcy, also said NovaWulf Digital Management and Fahrenheit were part of the Celsius auction. According to the law firm, the crypto companies hope to manage a restructured version of the fallen digital asset lender.
More than 600,000 Celsius creditors are banking on the auction since its outcome determines how and when they receive payments. Celsius reportedly owed $4.7 billion at its June 2022 collapse and was seeking a $7 billion valuation.
NovaWulf Factor in the Celsius Auction
Of all identified bidders participating in the three-way Celsius auction set, NovaWulf seemingly has the most leverage. The digital asset manager previously submitted a proposal that promised borrowers 85% returns for moving accounts to the NovaWulf platform. The plan stipulated that all borrowers with collateral to Celsius would receive 85% of said assets. However, said borrowers would have to hold the loan collateral for 5 more years on a new platform operated by NovaWulf.
At the time of the development in February, some Celsius borrowers were skeptical about the plan. Central to this skepticism was whether the new NovaWulf-run company would last long enough to repay their collateral in full. Speaking at a Twitter forum amid the development, David Adler, a lawyer representing a group of Celsius customers who secured retail loans, said:
“The one theme that comes back to me is the risk of insolvency of NewCo. All of them are saying why would I agree to pay these interest rates on a five-year term when I have no certainty the collateral will be there at the end.”
Nonetheless, the NovaWulf plan also proposed that other Celsius creditors would recover their funds through tokenized equity on the Provenance Blockchain. However, the concept of this project currently proves unpopular within the crypto space.
Inside Source Claims That Out-&-Out Crypto Asset Operators Seemingly Have The Edge
As the Celsius auction process heats up, an inside source sheds light on its inherent dynamics vis-à-vis the bidders involved. According to this source, NovaWulf could also be at a disadvantage to other bidders. This is because the likes of Coinbase and Gemini have the backing of veteran crypto operators. As a result, the consensus opinion is that the duo could elicit more value from Celsius by operating instead of liquidating its assets.
The Celsius auction could play out over several days this week, with the winner emerging later.
Celsius has been wrought with controversy since filing for Chapter 11 bankruptcy last summer. The company declared insolvency with a $1.19 billion deficit and sustained widespread accusations of fraud and misrepresentation.