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Canadian watchdogs join probe of Celsius’ multibillion-dollar collapse

BARBARA SHECTER

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

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 Southern District of New York in July revealed Celsius had US$5.5 billion in total liabilities.

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.

OPINION

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2022-08-10T07:00:00.0000000Z

2022-08-10T07:00:00.0000000Z

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