WestCap, a private equity firm, marks Celsius’ decline as a near total loss
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 crypto lender as a near total loss.
In this month’s letter to investors outlining the company’s second quarter performance, which Barrons saw, private equity firm WestCap Group wrote down the value of its fund’s $150 million investment in Celsius by 85%. “WestCap is actively working with an assembled team of top-notch experts to ensure representation of 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.
At the end of last year, the company had nearly $9 billion under management, according to Bloomberg.
In October, eight months before it halted withdrawals, Celsius Network raised $400 million from WestCap and Caisse de depot et placement du Quebec (CDPQ), Canada’s second-largest pension fund.
On Wednesday, the CDPQ said it would likely cancel its investment altogether. “Obviously things didn’t go as planned,” pension fund CEO Charles Emond told a press conference, while noting that investment in Celsius was weak for the fund. .
The financing valued Celsius at $3.25 billion. Celsius CEO Alex Mashinsky told clients the investment was a vindication of his company’s business model. Tosi was equally enthusiastic.
“WestCap and CDPQ believe that Celsius is a world-class company in size and scope, and will continue to be the leader at the forefront of the industry when it comes to innovation and regulatory acceptance,” he said in a press release at the time of the deal.
The investment came at a critical time for Celsius, which was already surrounded by state securities regulators who said the company’s yield product was an unregistered security that did not sufficiently disclose its risks, a charge the company has disputed. In September, states such as New Jersey, Texas and Alabama took enforcement action against Celsius, although most states allowed Celsius to continue operating in their jurisdictions as they negotiated with the managers to bring the company into compliance.
October’s investment was relatively low for WestCap and CDPQ. WestCap in its letter valued the 2021 fund that invested in Celsius at around $1.16 billion, slightly above its invested capital. But it significantly boosted Celsius’s credibility just as regulators began to question its business model.
“No one would invest that amount of money in Celsius if there were serious concerns that what we’re doing isn’t legit and doesn’t comply with all regulations,” Mashinsky told clients during an interview. a live video broadcast a few days after funding. announcement.
Celsius filed for bankruptcy protection on July 13, blaming the general crypto downturn and market volatility surrounding the May crash of a so-called stablecoin for its troubles.
The U.S. trustee for Celsius’ bankruptcy proceedings on Thursday asked a judge to appoint an independent reviewer to investigate how Celsius went bankrupt and whether customers were harmed by fraud or tort, among other issues. . The company’s latest statement on its assets this month indicated that it had approximately $2.85 billion more in crypto-related liabilities than it had in crypto assets.
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