Fahrenheit acquires Celsius assets to exit bankruptcy
The troubled crypto lender Celsius Network has selected Fahrenheit’s proposal as the winning bid to oversee a new entity owned by its creditors, paving the way for its exit from bankruptcy.
Fahrenheit, a consortium led by blockchain-based venture capital firm Arrington Capital, will bring the necessary capital, management team, and technology to establish and run the newly formed company, called NewCo. The latter will manage illiquid assets, including institutional loan portfolio, mining business, and alternative investments.
Celsius confirmed that under the proposed plan, its account holders will possess 100% of the new equity in NewCo. The company will be governed by a fresh board of directors, with a majority of the members appointed by the creditors.
Furthermore, Celsius disclosed that it has obtained a backup bid from the Blockchain Recovery Investment Consortium (BRIC), which is a holding company affiliated with Gemini Trust, owned by the Winklevoss brothers.
As part of the deal, the new company will be mandated to receive $500 million in liquid cryptocurrency. However, this amount may be lowered to $450 million if there are secondary market purchases involved. The responsibility of constructing various cryptocurrency mining facilities, including a new 100-megawatt plant, will be assigned to US Bitcoin Corp, a subsidiary of the Fahrenheit group.
David Barse and Alan Carr, members of the Special Committee of the Board, said: “We are very pleased that our competitive auction process produced a positive result for customers, including, most prominently, hundreds of millions of dollars in lower management fee savings and increased liquid cryptocurrency distributions to Celsius’ customers. We appreciate the robust interest that the Celsius platform has received from competing bidders and look forward to working with Fahrenheit to expedite the restructuring and distribute recoveries to creditors.”
Greg Moritz, Co-Founder at AltTab Capital, told FinanceFeeds that “The absolute first priority of the new Celsius must be finding a way to make account holders of the previous entity whole. Assuming the price of Bitcoin rises enough at some point that Celsius’ mining operations are highly profitable, I hope that everyone who trusted Celsius gets every dollar back as they deserve.”
“However, the failure of Celsius and Genesis should have made it clear that centralized lending platforms are inherently untrustworthy and contrary to the ethos of crypto. It’s important to remember that under US law the crypto assets held are not the property of depositors, but rather of the company. Meaning, that when the next centralized lending platform fails, the retail customers will yet again be the people taking a loss that is no fault of their own,” he added.
Earlier in March, a New York bankruptcy judge approved a deal struck between Celsius and its “custody account holders” that will allow them to begin immediate withdrawals of 72.5% of their claims.
According to the terms of the deal, individual custody account holders would receive their 72.5% claim in two distributions. The first tranche would be distributed upfront, and the second installment is set to be paid by the end of the year upon plan resolution.
Celsius announced in February that its committee of unsecured creditors selected Novawulf out of more than 130 bids as the sponsor for its proposed Chapter 11 restructuring scheme. The new plan, which was described as a “value-maximizing conclusion,” has been arranged by Celsius’ debtors and then obtained the full support of the creditors committee.
In all, the bankrupt lender suggests the restructuring proposal would enable more than 85% of its clients to retrieve roughly 70% of their claims in liquid crypto—which doesn’t include staked Ethereum. However, the exact amount payable would be determined after the payments to smaller accounts.
As of December 29, creditors of Celsius who feel they are entitled to payment have filed more than 17,000 claims.