Bankruptcy proceedings at Celsius Network | Shareholders, including CDPQ, want their piece of the pie

Everything “revolves around depositors” in Celsius Network’s bankruptcy proceedings, its shareholders, including the Caisse de Depot et Placement du Québec (CDPQ), are concerned. Although the deposits of around 1.7 million small savers are at risk, the owners of the crypto bank want their share of the pie if there is money to be recovered.

Posted at 6:00 am

Julien Arsenault

Julien Arsenault

In a petition recently filed with a New York bankruptcy court, representatives of the company’s shareholders demand a voice on the committee that participates in the proceedings. The objective is to recover part of their investments in the event of the sale of certain assets.

“The unsecured creditors committee is not only focused on maximizing value for depositors, without regard to shareholders, but also for debtors.” [Celsius] they have made it clear that the committee is their partner and that everything revolves around the clients”, the complainants write.

The document is signed in particular by the representatives of the shareholders. Joshua Mester is identified as an adviser to Quebecers’ wool stockings. The institution canceled its $200 million investment in Celsius Network announced just a year ago.

This approach by the Caisse comes in the wake of signals sent last August by its chairman and CEO, Charles Émond. After acknowledging the failure of the investment, he said that “legal options” are being studied, without going any further.

“This is one,” Caisse spokeswoman Kate Monfette said in a statement.

Our analysis continues. The CDPQ must protect the capital of its depositors, Quebecers.

Kate Monfette, CDPQ spokesperson

METERme Monfette had no further comment.

Like other crypto banks, partner Celsius Network pooled crypto deposits. It offered loans and interest, which could sometimes reach up to 17%, to depositors. This is much higher than what traditional banks offer.

The company turned to US bankruptcy law last July after being plunged into a liquidity crisis triggered by the collapse in cryptocurrency prices that began earlier in the year. It froze the deposits of its 1.7 million customers a month earlier. They have no guarantee of recovering their assets.

Depositors in distress

Since the crypto banking debacle, testimonials from struggling depositors have multiplied. Many had been seduced by the promises of Celsius Network CEO Alex Mashinsky. Dozens of letters testifying to his anguish were sent to the judge responsible for the case.

“I had life savings in Celsius Network that I hoped I could use in the not-too-distant future as a down payment on a house,” wrote Ali Jaz, for example, in a letter dated July 22. “Everything seems like a distant dream now. »

Quebec depositors are also in the dark, even if the sums involved are generally much lower compared to what has been seen south of the border.

The cryptobank model has raised questions, and the practices of its leaders have been flagged more than once since the company hunkered down from its creditors. On September 7, a report from a US government agency concluded that Celsius Network was approaching insolvency as early as 2019, further describing its business model as akin to a Ponzi scheme.

Yan Cimon, a senior lecturer in the department of management at Université Laval, is not surprised by the request from Celsius Network shareholders. He agrees, however, that “it looks bad” from a “PR point of view.”

“All stakeholders want to assert their interests,” says the expert. The challenge is to find the balance with the depositors. Failure to do so may have negative reputational impacts for shareholders. But there will be tension between depositors and shareholders. »

The New York courts will consider the matter on October 6, the date scheduled for the next hearing.

More information

  • US$1.9 billion
    Size of the hole in Celsius Network’s finances in July when it filed for bankruptcy

    Source: New York Courts

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