Insolvent cryptocurrency lender Celsius Network has selected NovaWulf Digital Management as a sponsor of its proposed Chapter 11 restructuring plan. If the plan is successful, the investment advisory firm will take over the operations of a new company and most clients are expected to recover up to 70 percent of their funds.

Celsius submitted the proposal to the United States Bankruptcy Court for the Southern District of New York on February 15 as part of a filing. The Celsius Official Committee of Unsecured Creditors (UCC), which is an organization that represents the interests of Celsius account holders, has given its approval to the proposal presented.

The proposal calls for the establishment of a new public platform known as NewCo, which would be owned entirely by Earn’s creditors. The UCC will be responsible for the appointment of the majority of NewCo’s board members. According to the idea, the reconstituted board will have no “foundational commitment to or affiliation with Celsius.”

In addition, NovaWulf will provide a direct financial contribution to the newly formed company in the range of $45 million to $55 million.

Celsius stated in the document that “the NovaWulf plan provides the best method for distributing the Debtors’ liquid crypto assets and maximizing the value of the Debtors’ illiquid assets through a new company led by experienced asset managers.” This was in reference to the NovaWulf plan’s ability to allocate liquid assets and maximize the value of illiquid assets.

Celsius’ current illiquid assets, mining activity and loan portfolio will be shifted to the new company, which also intends to offer crypto-oriented services in the near future.

According to the proposal, creditors whose claims were worth $5,000 or less as of the date of the petition will be placed in a “Convenience Class” and will be eligible to receive “a single distribution of liquid crypto.” This distribution will be paid out in the form of Bitcoin (BTC), Ether (ETH) and USD Coin (USDC).

The option is anticipated to allow more than 85% of Celsius clients to claim more than 70% of the cryptocurrency they have invested. Any Earn creditor with a debt of more than $5,000 may choose to reduce a claim to $5,000 to participate in the class.

Those who have claims worth more than $5,000, or those who have claims worth more than $1,000 but choose not to participate in the Convenience Class actions, will be eligible to receive a payment of any cryptocurrency remaining after the smaller accounts have been cleared.

In addition to this, they will get ownership of NewCo in the form of equity and management share tokens, which will entitle their holders to cash dividends.

Users holding Celsius Tokens (CEL), a native token used for user rewards currently trading around $0.50, will have their tokens valued and purchased at the Initial Coin Offering (ICO) price of $0.20 . Earn users who do not have Celsius (CEL) tokens will not have their tokens valued or purchased.

According to the proposal, “insider CEL token claims,” also known as customers who were provided early access to the ICO, “would not receive a refund.”

In addition, the proposal calls for the establishment of a “well-funded litigation trust” to take legal action against Celsius officials, including the company’s former CEO, Alex Mashinsky.

Before the proposed strategy can be put into effect, it must first be approved by US bankruptcy judge Martin Glenn.

Following a process in which Celsius contacted “more than 130 parties,” a total of six firms, including Binance, Bank To The Future, Cumberland DRW, and Galaxy Digital, submitted bids for the firm’s crypto assets.

After ceasing the withdrawals in July 2022 and citing “serious market circumstances” as the reason, the company ultimately decided to file for Chapter 11 bankruptcy protection the same month.