Investor Who Called Crypto Firm ‘World-Class’ Now Says It’s Near-Total Loss

By Canada Express News

-August 19, 2022

Alex Mashinsky, CEO of Celsius Network.

Less than a year ago, private equity investors and a pension fund touted Celsius Network as a “world-class company.” Now they are marking their investments in the bankrupt cryptocurrency lender as a near-total loss.

In this month’s letter to investors outlining the company’s second-quarter performance, Barron’s private equity firm WestCap Group has cut the value of its fund’s $150 million investment in Celsius by 85%. “WestCap is actively working with a curated team of top-notch experts to represent our interests” in Celsius’s bankruptcy proceedings, the company wrote.

WestCap and Celsius did not respond to requests for comment.

WestCap, which has offices in San Francisco and New York, was founded by Laurence Tosi, who previously served as chief financial officer for both Airbnb and Blackstone Group

At the end of last year, the company had nearly $9 billion under management, according to Bloomberg.

In October, eight months before it stopped shooting, Celsius Network raised $400 million from WestCap and Caisse de dépôt et placement du Québec (CDPQ), Canada’s second-largest pension fund.

On Wednesday, CDPQ said it would likely write off its investment entirely. “Clearly things are not going as expected,” the pension fund’s CEO Charles Emond said at a news conference, noting that the investment in Celsius for the fund was a small one.

The financing values ​​Celsius at $3.25 billion. Celsius CEO Alex Mashinsky told his clients that the investment justified his company’s business model. Tosi was equally enthusiastic.

“WestCap and CDPQ believe Celsius is a world-class company in size and scope, and will continue to lead the industry at the forefront of innovation and regulatory adoption,” he said in a press release at the time of the release. agreement.

The investment came at a critical time for Celsius, which had already been circled by state regulators who said the company’s return product was an unregistered security that did not adequately disclose its risks, a charge the company disputed. In September, states including New Jersey, Texas and Alabama took enforcement action against Celsius, though most states allowed Celsius to continue operating in their jurisdictions while negotiating with executives to bring the company up to the rules.

The October investment was relatively small for WestCap and CDPQ. In its letter, WestCap estimated the 2021 fund investing in Celsius at about $1.16 billion, slightly higher than the capital invested. But it gave Celsius a big boost in credibility just as regulators began to question the business model.

“No one would invest this amount in Celsius if there were serious concerns that what we’re doing isn’t legit and doesn’t meet all regulations,” Mashinsky told customers during a video livestream a few days after the funding announcement.

Celsius filed for bankruptcy protection on July 13, blaming the cryptocurrency’s general decline and market volatility surrounding the May crash of a so-called stablecoin for its struggles.

The US bankruptcy trustee for Celsius’ bankruptcy proceedings on Thursday asked a judge to appoint an independent investigator to investigate how Celsius went bankrupt and whether customers have suffered damage through, among other things, fraud or misdemeanor. The company’s latest overview of its assets this month said it had about $2.85 billion more in crypto-related liabilities than crypto assets.

Write to Joe Light at joe.light@barrons.com