CDPQ office building

That largest pension fund in Canada, CDPQ, acknowledged that it entered the crypto space “too soon” after taking a $150 million loss in a failed bet in the now-bankrupted crypto lending platform Celsius Network.

“For us, it is clear, when we look at all of this, we arrived too soon in a sector which was in transition”, stated the head of the pension fund, Charles Émond, in a recent conference call.

However, during this same call, the Chief Executive Officer of the Caisse de dépôt et placement du Québec (CDPQ), stated that the organization adopted a very cautious approach and perform adequate due diligence before jumping on the deal.

In the specific case of Celsius Network, they took a small 4% equity stake in the firm that was bought after several meetings and discussions with top consultants and experts. The stake was valued at $150 million at the time and was taken during a $400 million funding round led by WestCap, an equity firm headed by a former Airbnb executive.

This capital raise valued Celsius at around $3 billion but regulators were pressuring the firm about its product offering. For example, in September 2021, the company received a cease-and-desist order from authorities in the state of Kentucky over its savings accounts.

This order was accompanied by actions from other local regulators in Alabama, Texas, and New Jersey that prompted the company to explain how its operations and products were not in direct violation of the states’ securities laws.

The CDPQ either ignored these claims or decided that they had no merits whatsoever as they were not discouraged by them.

The CDPQ is Exploring Its “Legal Options” When it Comes to Celsius

Canada’s top pension fund is now forced to fully write off its investment in the firm led by Alex Mashinsky as Celsius filed for Chapter 11 bankruptcy in July this year with several reports pointing out that the firm has $2.8 billion less in crypto assets than what it owes to investors.

In addition, the demised crypto firm could soon run out of cash, a court report indicates, as its liquid reserves stood at $130 million at the beginning of this month. According to a forecast provided to the court, the company could face a liquidity shortage in October unless the court grants it permission to liquidate some of its assets.

Notably, Celsius’s Bitcoin (BTC) holdings were remarkably low compared to how many coins the platform owes to its customers. According to court documents, the firm had 14,578 BTC tokens in its possession by the end of July compared to 104,962 tokens it reportedly holds from investors.

The leader of the CDPQ acknowledged that the fund has the right to “explore legal options” against Celsius to recover at least a portion of the funds they lost.

However, considering how large the company’s balance sheet is and the fact that shareholders’ claims are typically the last in line during a bankruptcy proceeding, the odds of recovering some of that money are quite low at the moment.

CDPQ Reports $33.6 Billion Loss in First Half of 2022

Yesterday, the CDPQ reported its worst 6-month performance in the past 50 years as the value of its assets under management experienced a 7.9% decline during the first semester of the year resulting in a $33.6 billion loss.

“The first six months of the year were very challenging. The mix of factors we faced had not been witnessed in several decades: spiking inflation that triggered rapid and sharp interest rate hikes, rare simultaneous corrections in both stock and bond markets, fears of an economic downturn and the war in Ukraine with its many collateral effects”, CEO Emond stated.

The fund’s fixed-income portfolio was the most impacted by these macro headwinds as the value of the instruments held by the firm dropped by 13.1% during the first six months of 2022 compared to a 10.6% loss that its equity portfolio suffered during that same period.

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