The Caisse’s crypto bet could cost us nearly $200 million

Officials at Caisse de depot flatly refused to comment yesterday on a likely near $200 million loss at American crypto bank Celsius Network.

• Also read: The little players could well lose their T-shirts

• Also read: Cryptocurrency platform Celsius files for bankruptcy

• Also read: A Caisse partner is accused of setting up a Ponzi scheme

Established in October 2021, a month before the cryptocurrency market hit an all-time high, but how short-lived, the Caisse’s position in Celsius could well be one of the fastest-dissolving in the history of the institution, which was founded 57 years ago.

“I was amazed to learn that it is a conservative institution [comme la Caisse] had invested in such a company,” explained yesterday to the protocol Omid Malekan, cryptocurrency specialist and lecturer at Columbia University in New York.


Celsius Network CEO Alex Mashinsky (left) last year with investors who were very happy with the performance of their investment in the crypto bank at the time.

Photo from Twitter

Celsius Network CEO Alex Mashinsky (left) last year with investors who were very happy with the performance of their investment in the crypto bank at the time.

“The Worst of All Crypto Lenders”

“Cryptocurrency lending in general was a bad industry to invest in and Celsius was the worst crypto lender,” he added.

In February, Caisse de Depot et Placement du Québec (CDPQ) chief Charles Emond defended investing in Celsius, specifically saying that the institution was not interested in “speculating on crypto.”

However, according to Mr. Malekan, investing directly in cryptocurrencies would probably have been less risky than in Celsius.

Hear Olivier Bourque, business journalist on Alexandre Moranville-Ouellet’s mic on QUB radio:

The company secured itself from its creditors on Wednesday. In court filings in New York, she blamed her bankruptcy on “bad decisions” about investments, which left her with far more debt than financial assets.

As of Wednesday, Celsius had liabilities (debts) of $5.5 billion and assets of $4.3 billion, resulting in a deficit of nearly $1.9 billion.

The fall in cryptocurrencies in the spring prompted Celsius customers to withdraw billions of dollars from their accounts. The company responded by suspending all payouts on June 12.

“Celsius is not asking for permission at this time [au tribunal] to enable customer withdrawals,” the company said.

In the legal documents, we learn that Celsius’ problems began back in 2020, when deposits multiplied thanks to the explosion of cryptocurrencies. The company struggled to safely invest those sums to pay its clients promised returns, which could reach as high as 18%.

“Acceptable” speculation

“Everything that revolves around cryptocurrencies is clearly something that is on the scale of speculation,” said Franck Jovanovic, a professor of economics and finance at TÉLUQ University, yesterday.

However, the specialist refused to throw the stone at the fund. He reminded that the big money managers all invest in riskier securities hoping to improve their performance. In his opinion, this practice is “acceptable” as long as it only affects a small part of the total invested assets.

THE CELSIUS NETWORK CRYPTOBANK IN BRIEF

  • Founded in 2017 by entrepreneur Alex Mashinsky
  • 300,000 active users in June 2022
  • Assets of $6 billion (as of June 2022).

SOME IMPORTANT DATA

October 2021
La Caisse announces an investment in Celsius

November 2021
Israeli police arrest Celsius chief financial officer

June 2022
Celsius suspends all payouts

July 2022
Celsius seeks protection from its creditors

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