Cryptocurrency has become an increasingly popular way for people to diversify – and hide – their assets. The law is still catching onto this digital currency, so it’s largely unregulated. As one family law attorney says, “The legal infrastructure and regulatory infrastructure for this stuff is way behind. If you look at some of the people sitting in Congress — some of them are in their 70s and 80s — they have no idea what this is.” Bitcoin and other types of cryptocurrency are transacted using an encrypted ledger and without the use of a person’s name.
Cryptocurrency can be found – if you know how
What if you’re divorcing a spouse who has been gradually moving marital assets in to cryptocurrency? How do you find it so that you can seek the portion that’s rightfully yours? Although divorcing spouses are required to list all their assets, they could leave out their cryptocurrency. After all, there are no bank statements or other documents to prove that they’re withholding disclosure of many thousands of dollars or more.
As cryptocurrency has become an issue in more divorces, family law attorneys are including it in the forms they give clients to list their assets. Meanwhile, forensic accountants have gotten better at finding it.
It’s not invisible if you know where to look. For example, every transaction has a public and private key that can be traced to the person who made the transaction. Forensic accountants can study a person’s bank account transactions and match them up to transactions on crypto-trading platforms, which are similar to brokerage platforms.
If your spouse isn’t a cryptocurrency novice, they might be highly adept at hiding their transactions – and their assets. As one forensic accountant says, “An expert is going to know not to leave any evidence on their computer, and it can be much more difficult to subpoena.”
When should you be suspicious?
Maybe the assets your spouse lists in their disclosure don’t reflect the amount you believe they should. Perhaps you see unexplained withdrawals or other suspicious activity on the accounts you are able to access. If so, it may be worthwhile to bring in a forensic accountant.
Even if your spouse is barely tech savvy enough to handle online banking, let alone trade cryptocurrency, they could be hiding assets in other ways. Your attorney can likely recommend a good forensic accountant that specializes in divorce cases.