Celsius Network debacle | Depositors in the dark and the CDPQ still silent

The Celsius Network debacle amplifies uncertainty for retail investors eager to know how big their losses will be. Wrongly, some saw the presence of the Caisse de dépôt et placement du Québec (CDPQ) alongside the cryptobank as a guarantee of stability.

Julien Arsenault
The Press

“It’s an institution that manages pension plans, I told myself that they can’t afford to do anything,” says Samuel, a Montrealer who quantifies in “thousands of dollars” the cryptoassets that are frozen at the American company.

A user of the platform for a year and a half, the 28-year-old considered Celsius Network to be a more credible platform than others given that institutions such as the woolen stocking of Quebecers had decided to invest in it.

Nine months after receiving approximately CAN 200 million from the CDPQ, the American company, plunged into a liquidity crisis caused by a collapse in the price of cryptocurrencies, placed itself under the protection of American bankruptcy law, Wednesday evening . On June 12, it froze the withdrawals of its 1.7 million depositors.

“I was expecting maybe a cap on withdrawals, but I never would have guessed that we would get to this point,” said Samuel, who asked that his last name not be published.

Like other small investors, he hopes to recover some of his marbles, but is aware that this scenario may not occur.

So does Kevin. Concerned about the rumors circulating about potential problems at Celsius Network, the latter withdrew part of its assets, without going through with it, since the boss of the platform repeated that everything was under control. He also felt that the presence of the CDPQ alongside the cryptobank was reassuring.

“I thought that Celsius had probably reported to the Fund, says the man. This validated my thoughts that the platform might be more reliable. »

A dark portrait

On Thursday, the CDPQ, which manages public and parapublic pension and insurance plans, still refused to explain its investment in Celsius Network, which is seriously compromised. The institution has been silent since its partner froze the withdrawals of its customers.

Depositors, on the other hand, risk finding themselves empty-handed. It is unknown if they will be able to retire their assets if Celsius Network survives. The company’s terms of use state that an insolvency situation could cause “the total loss of all digital assets” in a wallet.

These small investors must prepare for the worst. According to a document filed with the New York courts, the cryptobank owes its customers US$4.7 billion in virtual currency, but only has US1.7 billion in assets in its vaults.

Professor of finance and cryptocurrency analyst at ESG UQAM, Alexandre F. Roch believes that users of Celsius Network and other such platforms in turmoil should have no illusions.

“It’s hard to restructure for these companies,” he says. It’s like trying to put the toothpaste back in the tube. Once the trust evaporates, it’s hard. To revive Celsius, it will also take a lot of willpower from investors. Will she be there? »

No control

Cryptobanks like Celsius are inspired by the model of traditional banks. They pool deposits of cryptocurrencies like bitcoin and offer loans and interest, often above 10%, to depositors. The problem is that these new players are not regulated and nothing protects depositors’ money.

Alexandre Lacasse estimates the value of the assets entrusted to the cryptobank at $50,000. He criticizes the lack of transparency of Celsius Network and its co-founder and CEO Alex Mashinsky.

“He had repeated several times on his videos that the investments on Celsius were very safe and that this situation [le gel des retraits] would never happen,” recalls Mr. Lacasse.

Quite the opposite happened. The Autorité des marchés financiers (AMF), which had already had discussions with Celsius Network surrounding its “compliance” in Quebec, said Thursday that it continued to “monitor the situation closely”. The stock market policeman repeated that you could “lose your entire investment” with cryptoassets.