Written by, Lauren Costanzo
In an already gruelling process of dividing a couple’s assets, cryptocurrencies have emerged as a new challenge for family and divorce lawyers.
In the new age of cryptocurrency, is it possible that your former spouse has a significant asset veiled behind the ever-elusive world of cyber currency?
The short answer is yes, it is possible, increasingly common and cryptocurrency is getting harder and harder to find.
What is a cryptocurrency?
A ‘cryptocurrency’ is a dispersed digital currency that removes the bank or credit-card middle-man from transactions. It is essentially a peer-to-peer system for creating “digital cash.”
It’s fairly untraceable, in fact, it is almost invisible and there is a good chance your former spouse has been able to funnel money to it for years without you noticing.
Can cryptocurrency form part of the divorce property settlement?
The short answer is yes, any assets that were acquired before, during or sometimes even after the relationship ended will form part of the divorce property settlement. So yes, if you can find it and if you can value it then yes it will likely form part of the settlement.
How do you find it?
1st Step – Pray that your former partner is honest with you
During the property settlement process in Australia, parties have a duty to provide full disclosure. However, the anonymous nature of digital currency potentially provides a haven for spouses wishing to hide their money from the other party. It is unfortunately common for one party to hide assets even though it’s technically not the right or even smart thing to do. So what do you do if you don’t think your partner is being honest with you, Look - At - The - Bank - Accounts.
2nd Step – Look at your bank accounts
When cryptocurrency is traded using an online exchange or bought with funds from a bank account, it can be easier to trace and value. You can usually see on your former spouse's statements when they’ve bought things from websites that trade currency and if you do see it then you need to investigate further. This might mean asking your former spouse for more details and if they won’t provide, possibly even subpoenaing that information from the cryptocurrency exchange website.
3rd Step – What if you can’t see anything in bank statements?
Sometimes cryptocurrency can be moved ‘offline’. Once it is moved offline, it becomes more difficult. If it is transferred onto a USB wallet or to a computer, for example, the good news is it can still be traced using forensics experts. Their job is to search through emails and computers to determine what transactions have occurred. Although this is good news, hiring a forensics expert can be a lengthy and expensive venture, costing thousands – sometimes more than the currency itself is worth.
4th Step – I’ve found this ‘crypto’ currency but what is it worth?
1 month movement August 2019
Another difficulty with cryptocurrency is the volatility in valuation.
The vast fluctuations make it difficult to value as the price can change drastically within the course of a divorce.
How do you split it if you can't value it?
Another solution to ease the repercussions of volatility, your divorce lawyer might suggest not worrying about a fixed valuation of the Bitcoin.
Instead, a better alternative would be splitting the Bitcoin itself and taking a chance selling it on an exchange when you feel the time is right.
Finally, it’s not easy but it's worth it (sometimes)
It is important that your divorce lawyer adds any cryptocurrency as part of the disclosure process.
Make sure your lawyer uses the correct language, and enquiries assist to ensure your partner discloses their Bitcoin.
Everything considered, it won’t be easy in the end for a party to get away with burying cash in cryptocurrency.
The Courts are used to undertaking cases that require meticulous asset finding, even those that are held offshore.
If you are worried about a spouse refusing to disclose their cryptocurrency, rest assured that in some circumstances, the Court can award profoundly in your favour to make up for it including for eg if the other party is being particularly dishonest making them pay for the cost of finding it.
Trust in the process but don't close your eyes.
Should you try to hide your assets in cryptocurrency?
If you are thinking of hiding assets like cryptocurrency – you shouldn’t.
Apart from being a shitty thing to do, in Australia, if you reach a deal with your former spouse and it is later found out that you didn’t disclose assets you could be in a messy place.
Any agreements that you’ve made might be overturned and anything you’ve submitted to the court not disclosing your assets could be found as fraudulent.
Written by, Lauren Costanzo
Lauren Costanzo is the founder and director of Cudmore Legal, a boutique family law firm based in Brisbane, Queensland, Australia. Lauren holds a Bachelor of Laws with a particular interest in Cyber and Family Law. Lauren is a ‘busy’ mum of two and has an eclectic interest in areas such as business, digital, law, mental health and fitness.
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This article has been republished by Divorce Resource with the kind permission of the author.