The Caisse's crypto bet could cost us nearly $200M

Cashier's crypto bet could cost us nearly $200M

UPDATE DAY

The leaders of the Caisse de dépôt flatly refused to comment yesterday on a probable loss of nearly $200 million in the American cryptobank Celsius Network.

Completed in October 2021, a month before the cryptocurrency market hits an all-time, but ephemeral high, la Caisse's holding in Celsius may well be one of the fastest-dissolving in the history of the institution founded 57 years ago.

“I was amazed to learn that a conservative institution [like the Caisse] had invested in such an undertaking,” the JournalOmid Malekan, a cryptocurrency scholar and lecturer at Columbia University in New York.

Celsius Network CEO Alex Mashinsky (left) last year with investors who were then very happy with the return on their investment in the cryptobank.

“The Worst Crypto Lender”

The Caisse's crypto bet could cost us nearly $200M

Cryptocurrency scholar Omid Malekan

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

In February, the big boss of the Caisse de depot et placement du Québec (CDPQ), Charles Emond, had defended the investment in Celsius, saying in particular that the institution was not interested “in speculating on crypto”.

< p>However, notes Mr. Malekan, a direct investment in cryptocurrencies would probably have been less risky than in Celsius.

The company placed itself on Wednesday in the shelter of its creditors. In court filings in New York, she attributed her insolvency to “poor investment decisions” that left her with far more debt than financial assets. p>

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

< p>The fall in cryptocurrencies in the spring caused Celsius customers to withdraw billions of dollars from their accounts. The company responded by suspending all withdrawals on June 12.

“At this time, Celsius is not seeking permission [from the court] to allow customer withdrawals,” the company said.

In the legal documents, we learn that the problems of Celsius began as early as 2020, when deposits multiplied thanks to the explosion of cryptocurrencies. The company had difficulty investing these sums in a safe way in order to be able to pay its customers the returns it promised, which could reach 18%. 

“Acceptable” speculation< /strong>

“Clearly, everything that revolves around cryptocurrencies is something that is of the order of speculation”, underlined yesterday Franck Jovanovic, professor of economics and finance at TÉLUQ University.

The specialist, however, refused to throw the stone at the Fund. He recalled that the major asset managers all invest in riskier securities in the hope of improving their performance. According to him, this practice is “acceptable” as long as it concerns only a small proportion of the total assets invested. 

THE CRYPTOBANK CELSIUS NETWORK IN BRIEF

  • Founded in 2017 by entrepreneur Alex Mashinsky
  • 300,000 active users as of June 2022
  • US$6 billion assets in June 2022

SOME KEY DATES

October 2021< br>La Caisse announces investment in Celsius

November 2021
Israeli police arrest Celsius chief financial officer

June 2022
Celsius suspends all withdrawals

July 2022
Celsius is safe from its creditors