Bitcoin and divorce: A nightmare for asset valuation

 Posted on April 26, 2018 in Divorce

Both parties in a divorce are expected to completely disclose all of their assets when it comes time to divide up the marital property.

Of course, it doesn’t always work that way. A lot of spouses have attempted to hide assets from their warring partners in the past — but the internet age has made it harder to get away with that sort of thing as money trails have become vastly more traceable online.

Then cryptocurrencies like bitcoin hit the market. These forms of wealth are fairly new and they allow people to deposit their wealth in ways that are still exceptionally hard to trace — which was an intentional part of their design. As more people of wealth start to invest in bitcoin and similar currencies, asset valuations in divorces may get increasingly complicated.

Trying to locate a spouse’s hidden fortune has always been a problem for some people — but attorneys who specialize in those sort of things are fairly good at tracking down hidden wealth. However, cryptocurrency is so new that many attorneys haven’t had time to learn much about it.

Here are some of the problems associated with cryptocurrency and divorce:

• There is no paper trail. Everything takes place through online transactions.
• There’s no centralized authority over the currency to administer a freeze from an injunction.
• The currency can be moved offline simply by transferring it to a USB drive — which can make it even harder to locate. Thousands of dollars can simply vanish in a single action.
• Attorneys don’t always think to ask about cryptocurrencies in depositions.
• Valuation can be difficult because the price of various types of cryptocurrency can rise and fall drastically in a matter of days or weeks.

Because the valuation alone can be so difficult to establish, it may be wiser to ask for the cryptocurrency to be divided evenly — or sold so that the proceeds can be divided.

If you suspect that your spouse is hiding money in bitcoin or another cryptocurrency, it’s wise to let your divorce attorney know your suspicions as soon as possible.

Source: bloomberg.com, “Bitcoin Bitterness Starts to Make Messy Divorces Even Worse,” Hannah George, accessed April 26, 2018