MONTREAL — The Caisse de dépôt et placement du Québec reported its results for the first half of 2022 on Wednesday, but its investment in Celsius Network was the US$150-million elephant in the room. The pension giant’s CEO Charles Emond offered fresh details about its stake in the bankrupt cryptocurrency lending company. Here’s what we learned and what we still don’t know:
Down to zero: CDPQ revealed it’s written off the entire US$150-million investment. It co-led a funding round in the New Jersey-based startup in October, alongside WestCap. Bankruptcy filings from Celsius this week showed a widening deficit in its balance sheet, with the company on track to run out of cash by October, according to its lawyers.
To be sure, CDPQ’s stake in Celsius was a tiny portion of its $392-billion portfolio. But its involvement has raised questions about the due diligence it conducted into the company prior to investing. Celsius, which promised customers high yields on crypto deposits, was forced to freeze withdrawals after a downturn in crypto prices made it unable to honour its obligations to creditors—leading to losses for retail investors. Securities regulators have been investigating the company’s business practices since before CDPQ invested.
Lawyering up: CDPQ is exploring “legal options” related to its investment, Emond said, without providing further details. Although Celsius has been hit by lawsuits, including one from a former employee accusing it of fraud, no equity holders have spoken out against the business. Still, asked whether CDPQ felt it was misled, Emond said: “That’s why we’re reserving our comments and exploring our legal options.”
Staff consequences: Emond said fund employees responsible for the investment would be held accountable, without specifying if actions were taken. At the same time, he cited “mitigating factors” that needed to be considered. “The story has not been concluded yet, and there’s a reason that we actually said we’re going to preserve our rights, and explore our legal options.” He didn’t say what those mitigating factors were. Emond also declined to say how many people were involved in the due diligence process, but said experts and consultants from “blue-chip firms” were included.
Fool me once: At the time of its investment, CDPQ emphasized blockchain technology’s disruptive potential. But after this experience with Celsius, will the fund continue to look for crypto investments? Emond had a simple answer for that question from The Logic: “No.”