Canadian pension fund giant Caisse de dépôt et placement du Québec (CDPQ) has written off its $150mn investment in struggling cryptocurrency lending firm Celsius, acknowledging that the company entered the burgeoning sector “too soon.”
Speaking at a news conference in Montreal on Wednesday (August 17, 2022), Charles Emond, chief executive of CDPQ, said its investment in Celsius last October marked the end of its foray into the digital asset industry.
Celsius became one of the biggest names to be caught by the sharp collapse in the price of digital assets in the spring. In June it froze customer withdrawals and weeks later filed for Chapter 11 bankruptcy protection in New York, a move that revealed a $1.2bn hole in the company’s balance sheet.
CDPQ Investment in Celsius
CDPQ, the $304bn investment firm that manages pension plans and insurance programmes in Quebec, said on Wednesday the stake in Celsius was written off “out of prudence”.
“For us it’s clear when we look at all of this, even if the last chapter has not been written, that we went in too soon into a sector that was in transition, with a business that had to manage extremely quick growth,” Emond said.
Although, the CEO noted that the fund employed due diligence and caution before betting on crypto. According to a statement from Emond:
“The due diligence was quite extensive with many experts and consultants involved. The team came in cautiously. We had a 4% equity stake. The conversations we had internally were pretty straightforward. The teams are accountable for that.”
The group’s comments on Wednesday mark a sharp contrast to October, when it said its Celsius investment was a sign of its “conviction” in blockchain technology.
Celsius Network Bankruptcy
The write-off of the group’s Celsius holdings — a small slice of its overall portfolio — came as the fund manager reported a C$28bn ($22bn) fall in assets in the six months to the end of June this year. However, in July 2022, Celsius filed for Chapter 11 bankruptcy protection in the United States after pausing withdrawals in June.
CDPQ said its portfolio was hit by a “rare and simultaneous” fall in both equity and bond markets, which led to a 7.9 per cent hit on its portfolio.
“The first six months of the year were very challenging,” said Emond, adding that its portfolio had still performed better than its benchmark, which was down 10.5 per cent.
Its Part of a Learning Progress
Responding publicly for the first time since Celsius’s slide into bankruptcy, Emond said: “Whether it is Celsius or any other investment, needless to say that when we write it off, we are disappointed with the outcome and not happy.”
Emond said he was aware there were challenges regarding crypto investments, but that “perhaps we underestimated the challenges.”
He felt “a lot of empathy” for Celsius investors and said the fund manager was “reserving our comments and exploring our legal options” related to the situation.
Asked if he regretted the Celsius investment, Emond, said: “As an investor it is a constant and never-ending learning process. You learn and make sure you don’t repeat the mistake.” He added the company never takes “any dollar loss lightly.”
Emond declined to go into detail on the internal repercussions of the investment. However, he added that “the teams will be accountable, as they always are.”
He also confirmed that CDPQ is not interested in further investments into crypto but said the pension fund manager was still optimistic on the future of blockchain technology. “The straight answer would be yes… you know, in these disruptive technologies, there’s ups and downs.”