It is understood that provincial regulators including Quebec’s Autorité des marchés financiers (AMF) have been digging into the matter since mid-June, shortly after the crypto lender suspended customer redemptions.
Sources say the AMF’s investigation is being driven, in part, by the fact that the province’s largest pension manager, the Caisse de dépôt et placement du Québec, invested $150 million in New Jersey-based Celsius last October. In July, Celsius filed for Chapter 11 bankruptcy protection and owes users about US$4.7 billion.
On the retail front, the Quebec regulator is understood to be focusing on whether there are users and clients in the province whose money is tied up in Celsius and, if so, how many.
The Ontario Securities Commission has a similar interest in whether the Celsius collapse affected Canadians and, sources say, there were clients in Ontario.
Celsius was not registered with provincial securities regulators in Canada, and Canadian regulators are understood to be collaborating with the U.S. Securities and Exchange Commission (SEC), as they often do on matters that span the Canada-U.S. border.
The SEC is also working with regulators in several states, including Texas, according to one 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 crypto lender suspended customer redemptions. Joseph Rotunda, enforcement director at the Texas State Securities Board, told Reuters at the time that his state’s investigation was a “priority,” and he has subsequently posted public appeals on LinkedIn encouraging Celsius clients in Texas and other states to come forward.
Celsius amassed 1.7 million clients in its five years of existence by framing itself as a disruptor to traditional banking and presenting its services as an opportunity to capitalize on the promise of cryptocurrency. It marketed opportunities to buy, borrow, swap and earn crypto through products including instant low-cost loans accessible via a web and mobile app and high-yield investments with returns of up to 17 per cent.
But things did not appear to go according to plan. The Chapter 11 bankruptcy protection filing in the United States Bankruptcy Court for the Southern District of New York in July revealed Celsius had US$5.5 billion in total liabilities. The company said it had $167 million in cash on hand.
Sources say the filing and potential restructuring or unwinding of assets may be complicating the regulatory probes.
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 underway,” Théberge said in an email.
In May, AMF chief executive Louis Morisset told a government committee in Quebec that the regulator, alongside others including the SEC, was trying to understand the business of crypto players such as Celsius.
The Ontario Securities Commission, meanwhile, has been cracking down on unregistered crypto players operating in Ontario, including a public battle with Binance Holdings Limited and Binance Canada Capital Markets Inc. Binance was found to have continued to operate in the province last year after publicly announcing intentions to cease operations because no entity in the Binance group held any form of securities registration in Ontario. The OSC stepped in, forcing Binance to sign an undertaking to cease operations while reserving the right to take enforcement action.
Asked about the status of the Celsius investigation in the United States, and cooperation between regulators, Cory Jarvis, a spokesperson in the SEC’s office of public affairs, said the U.S. regulator “does not comment on the existence or nonexistence of a possible investigation.”
An OSC spokesperson was not immediately available to comment on Celsius.
When the Caisse de dépôt invested in Celsius in October of 2021 as part of a US$400-million financing round, the Quebec pension giant called it a “leading global cryptocurrency earning and borrowing platform” and said the money — which helped peg the firm’s valuation at more than US$3 billion — would be used to “expand its offerings and products, connecting traditional capital markets with those of the cryptocurrencies.”
Alexandre Synnett, executive vice-president and chief technology officer at the Caisse, said at the time that the firm had “a strong management team that puts transparency and customer protection at the core of their operations.”
Officials at the Caisse say they plan to address 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, a senior adviser in media relations at the Caisse, said in an email.
“This is something that we take very seriously and we will provide further comment at the appropriate moment.”
She added that the Caisse is making every effort to preserve its rights through the court-monitored process for the benefit of clients, and characterized the Celsius investment as part of a very small portion of the overall portfolio that is invested in new technologies.
“Some of our investments, such as the one in Celsius, are not performing as expected,” she said.