Celsius grid collapse probed by Canadian authorities, sources say

Quebec’s largest pension fund invested $150 million in bankrupt crypto lender

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Canadian regulators are working with their counterparts in the United States as multiple jurisdictions investigate the multi-billion dollar collapse of cryptocurrency lender Celsius Network LLC, according to people with knowledge of the probes.

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It is understood that provincial regulators, including Quebec’s Autorité des marchés financiers (AMF), have been considering the matter since mid-June, shortly after the crypto lender suspended customer redemptions. .

Sources say the AMF investigation is prompted, in part, by the fact that the province’s largest pension plan manager, the Caisse de depot et placement du Quebec, invested $150 million in Celsius of New Jersey last October. In July, Celsius filed for Chapter 11 bankruptcy and owes users about US$4.7 billion.

On the retail front, the Quebec regulator would focus on whether there are users and customers in the province whose money is tied up in degrees Celsius and, if so, How many.

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The Ontario Securities Commission has a similar interest in whether the Celsius collapse affected Canadians and, sources say, there were customers in Ontario.

Celsius was not registered with provincial securities regulators in Canada, and Canadian regulators work with the United States Securities and Exchange Commission (SEC), as they often do on issues that cross the Canada-US border.

The SEC is also working with regulators in several states, including Texas, according to a source. In mid-June, Reuters reported that state securities regulators in Texas, Alabama, Kentucky, New Jersey and Washington all began investigating Celsius Network shortly after the lender crypto had suspended customer refunds. Joseph Rotunda, director of enforcement at the Texas State Securities Board, told Reuters at the time that his state’s investigation was a “priority”, and he later posted public appeals on LinkedIn encouraging the Celsius customers in Texas and other states to come forward.

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Celsius has amassed 1.7 million customers in its five years of existence by marketing itself as a disruptor to traditional banking and presenting its services as an opportunity to capitalize on the promise of cryptocurrency. He marketed opportunities to buy, borrow, trade and earn crypto through products such as low-cost instant loans accessible through web and mobile app and high-yield investments with returns up to 17%.

But things didn’t seem to be going as planned. Filing for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for The Southern District of New York disclosed in July that Celsius had total liabilities of US$5.5 billion. The company said it had $167 million in cash.

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Sources say the filing and potential restructuring or unwinding of assets could complicate regulatory investigations.

Sylvain Théberge, director of media relations at the AMF, declined to comment on the Quebec regulator’s interest in the Celsius case.

“We never deny or confirm if an investigation is ongoing,” Théberge said in an email.

In May, AMF chief executive Louis Morisset told a Quebec government committee that the regulator, alongside others including the SEC, was trying to understand the activities of crypto players such as Celsius.

The Ontario Securities Commission, meanwhile, has cracked down on unregistered crypto players operating in Ontario, including a public battle with Binance Holdings Limited and Binance Canada Capital Markets Inc. It was found that Binance had continued to operate in the province last year after publicly announcing intentions to cease operations as no Binance group entity held any form of securities registration in Ontario. The CSO intervened, forcing Binance to sign a covenant to cease operations while reserving the right to take enforcement action.

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The OSC declined to comment on Celsius.

“As a matter of general policy, the OSC is unable to confirm or comment on the existence, status or nature of any complaint, review or investigation,” Crystal Jongeward said in an email.

Asked about the status of the Celsius investigation in the United States and cooperation between regulators, Cory Jarvis, a spokesman for the SEC’s public affairs office, said the US regulator “does not comment on the existence or the non-existence of a possible investigation”.

When Caisse de dépôt invested in Celsius in October 2021 as part of a US$400 million financing round, the Quebec pension giant called it “a leading global platform to earn and borrow cryptocurrencies” and said the money – which has helped anchor the company’s valuation at over US$3 billion – would be used to “expand its offerings and products, connecting traditional capital markets to those of cryptocurrencies”.

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Alexandre Synnett, executive vice president and chief technology officer at Caisse, said at the time that the company had “a strong management team that places transparency and customer protection at the heart of its operations.”

Fund officials say they plan to respond to questions and concerns raised by the investment in Celsius at an “appropriate” time.

“Celsius is currently engaged in a complex process that will take time to resolve,” Kate Monfette, senior media relations advisor at Caisse, said in an email.

“This is something we take very seriously and will provide further comments when appropriate.”

She added that the Fund is making every effort to preserve its rights through the court-supervised process for the benefit of customers, and characterized Celsius’ investment as being part of a very small part of the overall portfolio invested in the new technologies.

“Some of our investments, like Celsius’s, are not working as expected,” she said.

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