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CANADIAN WATCHDOGS JOIN PROBE OF CELSIUS' MULTI-BILLION-DOLLAR COLLAPSE, SOURCES
SAY
Quebec's largest pension fund had $150 million invested in bankrupt crypto
lender
Author of the article:
Barbara Shecter
Publishing date:
Aug 09, 2022 • 5 minutes ago • 4 minute read • Join the conversation
In July, crypto lender Celsius Network filed for Chapter 11 bankruptcy
protection and owes users about US$4.7 billion. Photo by REUTERS/Dado
Ruvic/Illustration/File Photo
ARTICLE CONTENT
Canadian regulators are working with counterparts in the United States as
multiple jurisdictions investigate the multi-billion-dollar collapse of
cryptocurrency lender Celsius Network LLC, according to sources with knowledge
of the probes.
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ARTICLE CONTENT
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CANADIAN WATCHDOGS JOIN PROBE OF CELSIUS' MULTI-BILLION-DOLLAR COLLAPSE, SOURCES
SAY BACK TO VIDEO
It is understood that provincial regulators including Quebec’s Autorité des
marchés financiers (AMF) have been digging into the matter since mid-June,
shortly after the crypto lender suspended customer redemptions.
Sources say the AMF’s investigation is being driven, in part, by the fact that
the province’s largest pension manager, the Caisse de dépôt et placement du
Québec, invested $150 million in New Jersey-based Celsius last October. In
July, Celsius filed for Chapter 11 bankruptcy protection and owes users about
US$4.7 billion.
On the retail front, the Quebec regulator is understood to be focusing on
whether there are users and clients in the province whose money is tied up
in Celsius and, if so, how many.
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ARTICLE CONTENT
The Ontario Securities Commission has a similar interest in whether
the Celsius collapse affected Canadians and, sources say, there were clients in
Ontario.
Celsius was not registered with provincial securities regulators in Canada, and
Canadian regulators are understood to be collaborating with the U.S. Securities
and Exchange Commission (SEC), as they often do on matters that span the
Canada-U.S. border.
The SEC is also working with regulators in several states, including Texas,
according to one source. In mid-June, Reuters reported that state securities
regulators in Texas, Alabama, Kentucky, New Jersey and Washington all began
investigating Celsius Network shortly after the crypto lender suspended customer
redemptions. Joseph Rotunda, enforcement director at the Texas State Securities
Board, told Reuters at the time that his state’s investigation was a “priority,”
and he has subsequently posted public appeals on LinkedIn encouraging Celsius
clients in Texas and other states to come forward.
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ARTICLE CONTENT
Celsius amassed 1.7 million clients in its five years of existence by framing
itself as a disruptor to traditional banking and presenting its services as an
opportunity to capitalize on the promise of cryptocurrency. It marketed
opportunities to buy, borrow, swap and earn crypto through products including
instant low-cost loans accessible via a web and mobile app and high-yield
investments with returns of up to 17 per cent.
But things did not appear to go according to plan. The Chapter 11 bankruptcy
protection filing in the United States Bankruptcy Court for the Southern
District of New York in July revealed Celsius had US$5.5 billion in total
liabilities. The company said it had $167 million in cash on hand.
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ARTICLE CONTENT
Sources say the filing and potential restructuring or unwinding of assets may be
complicating the regulatory probes.
Sylvain Théberge, director of media relations at the AMF, declined to comment on
the Quebec regulator’s interest in the Celsius case.
“We never deny or confirm if an investigation is underway,” Théberge said in an
email.
In May, AMF chief executive Louis Morisset told a government committee in Quebec
that the regulator, alongside others including the SEC, was trying to understand
the business of crypto players such as Celsius.
The Ontario Securities Commission, meanwhile, has been cracking down on
unregistered crypto players operating in Ontario, including a public battle with
Binance Holdings Limited and Binance Canada Capital Markets Inc. Binance was
found to have continued to operate in the province last year after publicly
announcing intentions to cease operations because no entity in the Binance group
held any form of securities registration in Ontario. The OSC stepped in, forcing
Binance to sign an undertaking to cease operations while reserving the right to
take enforcement action.
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ARTICLE CONTENT
Asked about the status of the Celsius investigation in the United States, and
cooperation between regulators, Cory Jarvis, a spokesperson in the SEC’s office
of public affairs, said the U.S. regulator “does not comment on the existence or
nonexistence of a possible investigation.”
An OSC spokesperson was not immediately available to comment on Celsius.
When the Caisse de dépôt invested in Celsius in October of 2021 as part of a
US$400-million financing round, the Quebec pension giant called it a “leading
global cryptocurrency earning and borrowing platform” and said the money — which
helped peg the firm’s valuation at more than US$3 billion — would be used to
“expand its offerings and products, connecting traditional capital markets with
those of the cryptocurrencies.”
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ARTICLE CONTENT
MORE ON THIS TOPIC
1. CAISSE ADMITS $150-MILLION INVESTMENT IN BANKRUPT CELSIUS ‘RAISES A NUMBER
OF QUESTIONS’
2. INSIDE CELSIUS: ONE OF CRYPTO’S BIGGEST LENDERS HAVING A ‘LEHMAN BROTHERS
MOMENT’
3. CRYPTO LENDER CELSIUS FILES FOR BANKRUPTCY AFTER CASH CRUNCH
Alexandre Synnett, executive vice-president and chief technology officer at the
Caisse, said at the time that the firm had “a strong management team that puts
transparency and customer protection at the core of their operations.”
Officials at the Caisse say they plan to address questions and concerns raised
by the investment in Celsius at an “appropriate” time.
“Celsius is currently engaged in a complex process that will take time to
resolve,” Kate Monfette, a senior adviser in media relations at the Caisse, said
in an email.
“This is something that we take very seriously and we will provide further
comment at the appropriate moment.”
She added that the Caisse is making every effort to preserve its rights through
the court-monitored process for the benefit of clients, and characterized
the Celsius investment as part of a very small portion of the overall portfolio
that is invested in new technologies.
“Some of our investments, such as the one in Celsius, are not performing as
expected,” she said.
• Email: bshecter@postmedia.com | Twitter: BatPost
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