Centennial Grid Disaster | Depositors in the dark and CDPQ are still silent

The Celsius Network debacle is amplifying uncertainty among retail investors keen to know the extent of their losses. Wrongly, some have seen the presence of the Caisse de Depot et placement du Québec (CDPQ) alongside the crypto bank as a guarantee of stability.

Updated July 14

Julian Arsenault

Julian Arsenault
Journalism

“It’s an organization that manages retirement plans, I told myself they couldn’t do anything,” said Samuel, a Montrealer who identifies “thousands of dollars” of crypto assets being frozen at the US company.

Using the platform for a year and a half, the 28-year-old considered Celsius Network to be a more credible platform than others since organizations like Wool Storage in Quebec decided to invest in it.

Nine months after receiving nearly 200 million Canadians from CDPQ, the US firm plunged into a liquidity crunch caused by the collapse in cryptocurrency prices, which placed itself under the protection of US bankruptcy law, on Wednesday night. On June 12, it froze the withdrawal of 1.7 million depositors.


Photo by Dadu Rovich, Reuters

Last October, Celsius Network raised more than half a billion cans from the CDPQ fund and Westcap fund.

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

Like other small investors, he hopes to recover some wear and tear, but realizes that this scenario may not happen.

So does Kevin. Concerned about rumors circulating about possible problems with the Celsius network, the latter withdrew part of its assets, without going through them, because the platform’s head reiterated that everything was under control. He also felt that having CDPQ alongside the crypto bank was reassuring.

“I thought Celsius might have told the fund,” says the man. “This confirmed my ideas that the platform might be more reliable.”

dark picture

On Thursday, the CDPQ, which manages public and semi-public pension and insurance plans, still refused to explain its investment in Celsius Network, which was seriously compromised. The institution has been silent since its partner froze its clients’ withdrawals.

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 service state that an insolvency event could result in a “complete loss of all digital assets” in the wallet.

These small investors must prepare for the worst. According to a document filed with New York courts, the crypto bank owes customers $4.7 billion in virtual currency, but only has $1.7 billion in assets in its vaults.

Alexander F. Roche, a finance professor and cryptocurrency analyst at ESG UQAM, believes that users of Celsius Network and other platforms in turmoil should not be under illusions.

“It’s hard to restructure these companies,” he says. It’s like trying to put toothpaste back in the tube. Once the confidence evaporates, it becomes difficult. To revive the degree, it will also require a lot of willpower from investors. Will you be there? »

Do not judge

Crypto banks like Celsius are inspired by the traditional banking model. They collect cryptocurrency deposits such as bitcoin and provide depositors with loans and interest, often above 10%. The problem is that these new players are unregulated and nothing protects depositors’ money.

Alexandre Lakas estimates the value of the assets entrusted to the crypto bank at $50,000. He criticizes the opacity of Celsius Network and its co-founder and CEO Alex Mashinsky.


Screenshot from Twitter

On June 11, before the withdrawals from Celsius network depositors were frozen, Grand President Alex Mashinsky claimed that everything was fine.

“He reiterated many times in his videos that investments in Celsius were very safe and that this situation [le gel des retraits] Mr. Lacasse remembers.

The exact opposite happened. The March Funders Foundation (AMF), which has already had discussions with Celsius Network about its “compliance” in Quebec, said Thursday that it continued to “closely monitor the situation”. The stock market cop repeated that you can “lose your entire investment” with crypto assets.

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  • 420 billion
    This is CDPQ’s net assets as of December 31.

    Source: CAISSE DE DÉPÔT ET PLACEMENT DU QUÉBEC

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