Another domino is teetering in the cryptocurrency markets, and this time it’s also weighing on a Canadian pension fund. Celsius Network, a U.S. crypto-lending startup backed by the Caisse de dépôt et placement du Québec, said last night that it’s suspending withdrawals and transfers of customers’ funds. The move puts into question the safety of billions of dollars of consumer deposits held with Celsius, which promised yields as high as 17 per cent.
What it means: Celsius said the suspension will ensure it can meet its withdrawal obligations in the future. The move comes amid a punishing downturn for cryptocurrencies, making it unable to cover payments to customers who deposited funds into the platform. In addition to offering high-yield savings products, Celsius also lets customers take loans against their cryptocurrency holdings. Celsius didn’t respond to The Logic’s request for comment.
A big backer: CDPQ reportedly put US$150 million into the company’s US$400-million fundraising round last fall—its first crypto investment, which it co-led with WestCap.
“Celsius has been impacted by very difficult markets in recent weeks, more specifically, the strong volume of withdrawals by customers,” CDPQ spokesperson Kate Monfette said in an email. “Celsius is taking proactive action to uphold its obligations to its customers (Celsius community) and has honoured its obligation to its customers to date. Our team is closely monitoring the situation.”
At least one other major Canadian pension fund has a noteworthy crypto investment on its books: Ontario Teachers’ Pension Plan, which invested in FTX in October 2021.
Red flags: Before CDPQ’s investment was made public in October, Celsius had already received a cease-and-desist letter from New Jersey authorities and an order to appear in court from securities regulators in Texas. Days after the announcement, the company said it received a request for information from New York state officials about its business practices. And, in November, Celsius CFO Yaron Shalem was arrested in Israel amid a police investigation into an unrelated case.
The big picture: These are grim times for crypto investors, with Bitcoin plunging to US$22,603, its lowest since December 2020. Last month’s collapse of Luna and TerraUSD, two related cryptocurrencies, sent shockwaves through the market as investors lost tens of billions of dollars.
