Celsius auction set for Tuesday as Coinbase and Gemini join bidding for bankrupt firm

April 23, 2023, 4:17 PM UTC
Alex Mashinsky, founder and CEO of Celsius. There is a lot at stake for more than 600,000 Celsius creditors, since the outcome of the auction will determine how and when they get paid.
Bruno de Carvalho—SOPA Images/Sipa USA/Reuters

The sale of Celsius, the crypto lender that was seeking a valuation of over $7 billion when it collapsed in June, took a number of twists this weekend as a bankruptcy filing revealed two new consortiums will take part in a three-way auction for the company that’s set for Tuesday.

According to the filing, one of the new groups seeking to take over Celsius is called Fahrenheit and is backed by well-known venture capitalist Michael Arrington along with Steven Kokinos, the former CEO of the blockchain project Algorand, and investment banker Ravi Kaza. The other is called Blockchain Recovery Investment Committee and is backed by the likes of Gemini Trust—owned by the Winklevoss twins—and the fund manager VanEck, which is seeking to create a crypto ETF.

The emergence of these two new bidders comes after grumblings about an initial proposal put forward by asset manager NovaWulf, which was selected as the so-called stalking horse bidder—a role that gave it an inside track to taking over Celsius.

There is a lot at stake for more than 600,000 Celsius creditors, since 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, which it entered last summer. At the time, Celsius reportedly owed customers $4.7 billion.

The NovaWulf plan would see small creditors, most of whom were Celsius customers who had put under $5,000 on the platform, receive around 70% of their funds back, according to a recent report by CoinDesk. The remaining creditors would recover in the form of tokenized equity on something called the Provenance blockchain, which is an obscure project even in crypto circles.

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. In a subsequent statement to Fortune, NovaWulf disputed this characterization, pointing to details of its plan that propose to operate and grow several elements of the business.

Those assets include a loan book, holdings in a number of venture capital backed startups, and a large fleet of crypto mining machines that could in theory be revved up and produce immediate returns for the new owner.

Auction set for Tuesday

In its weekend filing, the law firm Kirkland & Ellis, which is overseeing the bankruptcy, said the three-way auction would commence on Tuesday at 2 p.m. at its 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.

On Saturday evening, Celsius tweeted news of the filing and Arrington then published a series of tweets about Fahrenheit’s involvement, including one about Coinbase’s participation that he’s since deleted. Coinbase declined to comment on the tweet but did not deny its involvement.

The winner of the auction, which could take several days to play out, will likely emerge later this week.

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. These include Celsius founder Alex Mashinsky, who is the target of a lawsuit by the State of New York that accuses him of concealing risky investments while assuring customers the company was as safe as a bank.

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