Everything “revolves around depositors” in Celsius Network’s bankruptcy proceedings, worry its shareholders, including the Caisse de depot et placement du Québec (CDPQ). Even though the deposits of around 1.7 million small savers are at risk, the owners of the cryptobank want their piece of the pie if there is money to be recovered.
Posted at 6:00 a.m.
In a petition recently filed with a New York bankruptcy court, representatives of the company’s shareholders are demanding a voice on the committee that participates in the proceedings. The objective is to recover part of their investments in the event of the sale of certain assets.
“Not only does the unsecured creditors’ committee focus on maximizing value for depositors, disregarding shareholders, but debtors [Celsius] have made it clear that the committee is its partner and that everything revolves around the customers,” the complainants write.
The document is notably signed by the shareholder representatives. Joshua Mester is identified as an adviser to the woolen stockings of Quebecers. The institution wrote off its $200 million investment in Celsius Network announced just a year ago.
This approach by the Caisse comes in the wake of the signals sent last August by its President and Chief Executive Officer, Charles Émond. After acknowledging the failure of the investment, he said that “legal options” were being studied, without going any further.
“This is one,” Caisse spokeswoman Kate Monfette said in a statement.
Our analysis continues. The CDPQ must protect the capital of its depositors, Quebecers.
Kate Monfette, CDPQ spokesperson
Mme Monfette did not comment further.
Like other cryptobanks, partner Celsius Network pooled cryptocurrency deposits. It offered loans and interest, which could sometimes reach up to 17%, to depositors. This is much higher than what traditional banks offer.
The company turned to US bankruptcy law last July after being plunged into a liquidity crisis caused by the collapse in cryptocurrency prices that began at the start of the year. It froze the deposits of its 1.7 million customers a month earlier. They have no guarantee of recovering their assets.
Depositors in distress
Since the cryptobank debacle, testimonials from distressed depositors have multiplied. Many had been seduced by the promises of the CEO of Celsius Network, Alex Mashinsky. Dozens of letters testifying to their distress were sent to the judge responsible for the case.
“I had life savings at Celsius Network that I hoped to be able to use in the not so distant future as a down payment for a house,” wrote Ali Jaz, for example, in a missive dated July 22. “It all seems like a distant dream now. »
Quebec depositors are also in the dark, even if the sums involved are generally much lower compared to what has been seen south of the border.
The cryptobank model has raised questions and the practices of its leaders have been singled out more than once since the company took shelter from its creditors. On September 7, a report from a US government agency concluded that Celsius Network was approaching insolvency as early as 2019, in addition to describing its business model as something akin to a Ponzi scheme.
Yan Cimon, full professor in the management department at Laval University, is not surprised by the request from Celsius Network shareholders. He agrees, however, that “it looks bad” from a “public relations point of view”.
“All stakeholders want to assert their interests,” says the expert. The challenge is to find the balance with the depositors. Otherwise, it may have negative reputational impacts for shareholders. But there will be tension between depositors and shareholders. »
The New York courts will consider the matter on October 6, the date scheduled for the next hearing.
Learn more
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- US$1.9 billion
- Size of hole in Celsius Network’s finances in July as it filed for bankruptcy
Source: New York Courts