As long as divorce has existed, couples have attempted to hide money, property, and other assets from one another. While the practice will likely never go away, the specific methods used continue to evolve with technology. Cryptocurrency, known for its privacy and lack of regulation, is the newest method used by deceptive soon-to-be-ex spouses.
Cryptocurrency Basics
Cryptocurrency is roughly ten years old, but has recently exploded in popularity due to increased accessibility. Purchasing Bitcoin, Ethereum, and other digital currencies is easy to do with a bank account or other digital payment method. Additionally, the number of businesses that accept cryptocurrency continues to grow, further increasing the usefulness of digital coins.
Despite its increasingly broad appeal, cryptocurrency remains largely unregulated and untraceable. To hide assets, coins can be kept in "cold storage." They're deposited into a digital wallet accessible only by a private key. While traditional funds are needed to purchase cryptocurrency, as time passes, the funds become increasingly harder for anyone besides the owner to track.
Digital Currency During the Divorce Process
Naturally, this anonymity works well for anyone attempting to hide their net worth during a divorce. The initial purchase of cryptocurrency would be trackable. However, once someone owns digital currency, they can then use it to buy a different type. Also, digital currency increases in value over time. Even if the initial purchase is discovered, the current balance of the account could be higher by several orders of magnitude, and only the account holder would be aware.
In some states, such as New Jersey, divorcing spouses are legally required to report cryptocurrency. The issue is compliance. Because cryptocurrency is so easy to hide, many people decide to ignore the law, assuming one is even in place.
Family attorneys must carefully investigate the income sources of their client's ex-spouse. The discovery process can include interviews, depositions, and document requests. A printout of the spouse's wallet activity is one of the most common pieces of evidence found during the stage. Verifying the presence of the wallet, but not the contents within, is a fairly straightforward process using simple cryptocurrency software.
The Future of Cryptocurrency as Related to Family Law
"Cryptocurrency introduces a new complication during a contentious divorce," says Hartford divorce lawyer Kevin O'Leary of Dolan Divorce Lawyers, PLLC. "However, an experienced family law attorney still has options to help ensure their client gets a fair distribution of shared assets."
An attorney will carefully review all financial documents for any discrepancies. Evidence of cryptocurrency can include:
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Credit card purchases on crypto exchanges such as Coinbase, Binance, and PrimeXBT
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A large deposit made through a PayPal account
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Recent purchases without an existing financial trace (such as buying a Tesla or another large-ticket item purchasable by cryptocurrency)
Additionally, a divorce attorney must not only understand the law today, but how it may change in the future. Twenty-five states are currently proposing legislation designed to reduce its anonymity, such as requiring the filing of transaction reports or collecting names and addresses when transferring money into crypto wallets.
Unfortunately, no matter what crypto technology looks like, some contentious divorces will always involve one party attempting to hide money from another. Anyone undergoing a divorce is strongly encouraged to seek a qualified divorce attorney with knowledge about digital finances, to help them obtain the full extent of any assets they're legally owed.
* This is a contributed article and this content does not necessarily represent the views of sciencetimes.com
