Crypto Divorce – what to do if you think your spouse is hiding Bitcoin and other cryptocurrencies from you
From Bitcoin to Ethereum, managing the division of cryptocurrencies in a divorce is understandably very complicated – and even more so if you think your spouse may be hiding their digital assets from you. In this guide, two of our Family lawyers, Mark Phillips and John Newberry who are currently dealing with divorce cases involving cryptocurrencies, answer some of the most frequently asked questions.
Is it legal for my partner to hide Bitcoins and other digital currencies from me in our divorce?
Parties have a duty to provide full and frank financial disclosure during a divorce. Unfortunately, it is not unheard of for some parties to attempt to hide their assets from their respective spouses and cryptocurrencies may make this process easier.
Whilst cryptocurrencies and the blockchains they use are not an entirely anonymous system, they are unregulated and the identity of the user is hard to trace. There is no doubt that it is ‘easier’ for someone to hide the existence, or the value of their cryptocurrency assets from their husband or wife in divorce. This does not mean however that you are powerless to challenge their existence and value.
I’m certain my partner is hiding Bitcoins from me, but what can I do?
Attempting to hide any asset during a divorce is risky and can result in the non-disclosing party being in contempt of court and liable to costs penalties. Even without concrete evidence of cryptocurrency assets a Judge could make inferences as to their existence and potential value and factor this in to their overall judgement and related financial orders.
For example, one potential outcome would be one spouse being awarded all the ‘copper-bottomed’ assets (which typically include a house, cash in the bank, pensions and other investments) and the non-disclosing spouse being left with the risk-laden or non-disclosed (but inferred) assets (such as a Bitcoin holding).
“Your advisers need to understand the implications of cryptocurrencies on any divorce settlement and have the network of specialist advisers to ensure that they are traced and valued correctly.”
How can I find out how much money my partner has hidden in cryptocurrencies?
Although money held within a blockchain is largely anonymous and hard to trace, it’s ‘entrance’ into the digital space will be traceable. For example, if you can prove that large amounts of money have been transferred through a cryptocurrency exchange, then you will find yourself in a strong position.
A forensic analyst can help you identify these touch points and give weight to your claim; however it is important not to spend large sums of money on trying to prove the existence of something, which has a very fluid value. A good divorce lawyer will be able to advise you on the best approach with regards to proving the existence of Bitcoins in divorce, and if it is financially worth doing so.
Nevertheless, as with any other class of asset under English divorce law, the Court retains extensive discretionary powers to distribute cryptocurrencies. Although digital currencies may be harder to value than more traditional assets such as stocks and shares, this does not prevent the Judge from determining a valuation for the purposes of imposing a financial settlement on parties to a divorce.
“Tracing cryptocurrencies could be enormously time-consuming and expensive. This is, of course, much easier if cryptocurrencies are traded via an online investment platform and bought with funds from a bank account, as the original value of the transaction can then be established.” – Mark Phillips
If my partner is hiding cryptocurrencies from me, can I do the same?
We would not recommend that you actively choose to hide the existence of Bitcoins, or any form of cryptocurrency during your separation from your partner. As shown in this guide, cryptocurrencies, or at least their value, are not immune from being reallocated during a divorce.
Divorces can be highly stressful and deceitful behaviour often backfires and can turn out to be very costly. Any attempt to hide assets, whether they are Bitcoins or not, is likely to be frowned on by a Judge if the proceedings do go to court.
What can the Courts do about it?
The rapid rise in the popularity of Bitcoin since its creation in 2009 and the wealth it has generated, means that digital currencies are likely to become a frequent and significant feature in modern day divorces, notwithstanding their volatility and elusive nature.
The English divorce courts retain extensive powers to order full disclosure and penalise non-disclosure. Those powers will be tested in the Bitcoin era but in essence cryptocurrencies will be just another class of asset to be divided between the parties in a divorce.
What should I do next?
If you believe that your partner is hiding bitcoins from you in your divorce, please contact Vandana Chitroda or Mark Phillips who will be able to advise you.