Celsius Depositors Fracture Again – ‘Withhold’ Group Retains Lawyer

Celsius depositors fracture again, as a US based depositors group, called “Withhold” retains legal counsel. In the hopes that their special interests will be upheld in court, while at the same time making the bankruptcy case messier and more contentious.

The “Withhold Accounts” category consists of clients in U.S. states where Celsius was unable to provide operable custodial accounts due to regulators’ cease and desist orders. These individuals were given the opportunity of transferring their cash to withhold accounts, where they remain frozen.

The Withhold group, which accounts for about $14.5 million of the over $12 billion left on Celsius after withdrawals were halted in June, has retained the legal services of Deborah Kovsky-Apap, a partner at Troutman Pepper.

Deborah Kovsky-Apap is reported as saying:

“We believe that the coins held in Withhold are not property of the estate,”

“They’re simply not part of the Celsius ecosystem – it’s more like the depositors left their wallet at the bar and the bartender is just holding onto it until they come back to get it. We believe the Withhold accounts should be unfrozen as soon as possible so that depositors can retrieve their property.”

Celsius’s bankruptcy hearing is attempting to pacify 1.7 million consumers after the company frozen user accounts in June due to a massive hole in its financial sheet. Many of those were retail cryptocurrency users who were drawn to the promised rewards of decentralized finance (DeFi) and considered Celsius as a secure alternative because the firm was situated in the United States and presented itself as a better option than a bank.

Celsius must also account to its big institutional debtors and equity investors.

The Celsius ad hoc group scenario, in which bankruptcy claimants who feel they have a strong enough defense engage their own legal counsel, is not unique to Withhold. Celsius custodial account holders who did not participate in the Earn program have also obtained their own legal counsel. Celsius depositors fracture again in the hopes that in doing so they will better defend their interests.

Celsius clients in nine U.S. states were notified on April 15 that they would not be eligible for custody accounts because they were not certified investors. These customers were assured that if they wanted to stay in the Earn program, they could be grandfathered in, according to Benny Wong, one of the Withhold group’s leaders.

“When it came to withdrawing out of Earn, Celsius gave a lot of warning messages that you are irreversibly withdrawing out of Earn and that you are going to lose out on earning interest until it becomes legal to exist in your state,” said Wong.

“But then funds outside of Earn just got put into this third account type that we never even knew existed.” Wong also stated.

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