The sale of Celsius, a crypto lender that collapsed last June while seeking a valuation of over $7 billion, is set for a three-way auction on Tuesday, with two new consortiums joining the bidding. The auction is the latest development in a bankruptcy process that began last summer and has left more than 600,000 Celsius creditors uncertain about the fate of their funds. The outcome of the auction will determine how and when they get paid and whether the company will become a going concern when it exits Chapter 11.
The two new bidders, Fahrenheit and Blockchain Recovery Investment Committee, are backed by well-known names in the crypto industry, including Michael Arrington, the former CEO of Algorand, Gemini Trust (owned by the Winklevoss twins), and fund manager VanEck, which is seeking to create a crypto ETF. The emergence of these new bidders comes after grumblings about the initial proposal put forward by asset manager NovaWulf, which has been selected as the stalking horse bidder, giving it an inside track to taking over Celsius.
According to a person familiar with the project, the new bidders would be superior to NovaWulf because they are backed by veteran crypto operators who could likely extract more value by operating rather than liquidating the bulk of Celsius's assets. These assets include a loan book, holdings in venture capital-backed startups, and a large fleet of crypto mining machines that could in theory produce immediate returns for the new owner.
The NovaWulf plan would see small creditors, most of whom were Celsius customers who had put under $5000 on the platform, receive around 70% of their funds back, while the remaining creditors would recover in the form of tokenized equity on the Provenance Blockchain. However, the Provenance Blockchain is an obscure project even in crypto circles, and the new bidders may be able to offer a better deal for all creditors.
The auction is set to commence on Tuesday at 2pm at the Kirkland & Ellis law firm's Manhattan office. Customers and creditors are anxious for the process to begin, not only because it will be a major step forward in recovering their money, but also because the bankruptcy process has already eaten away millions of dollars of Celsius's remaining assets. It's not clear who has the best opportunity to prevail in the bidding, though the Fahrenheit team may benefit from having industry giant Coinbase as part of its consortium.
Celsius's emergence from bankruptcy will be another watershed moment for the crypto industry as it seeks to recover from a disastrous year, which saw numerous high profile companies implode and revelations that several once-respected industry leaders had engaged in fraud. Celsius founder Alex Mashinsky is the target of a lawsuit by the state of New York, which accuses him of concealing risky investments while assuring customers that the company was as safe as a bank.
The outcome of the auction will have significant implications for the crypto industry and its participants. If the new bidders are successful, they may be able to extract more value from Celsius's assets than NovaWulf's proposed plan, which could boost confidence in the crypto lending sector. On the other hand, if NovaWulf prevails, it may reinforce the view that the sector is not yet mature enough to handle large-scale lending operations. Regardless of the outcome, the auction is sure to be closely watched by industry insiders and market participants alike.
