Cryptocurrency and Divorce

Is my spouse hiding Bitcoin?
Judge,gavel,on,wooden,background,with,bitcoin

The internet is full of alarming articles about divorcing spouses hiding assets using cryptocurrency (aka “crypto”). Luckily, in most instances, this is not the case.

While it is true that cryptocurrency was created to transfer money anonymously, nowadays, it is more often purchased as an investment and easily traceable.

Knowing how crypto is handled in divorce can go a long way to quell concerns that your spouse is siphoning your wealth into an undisclosed digital currency. While there are cases where spouses hide cryptocurrencies, it is not typical — at least not yet. This article addresses common questions that arise when a divorcing spouse is concerned about locating cryptocurrency assets.

While it is true that cryptocurrency was created to transfer money anonymously, nowadays, it is more often purchased as an investment and easily traceable.

How Do Colorado Courts Divide Crypto Assets in Divorce?

The good news is that Colorado courts treat crypto similarly to any other investment in divorce. No matter who purchased the crypto — if it was acquired during the marriage, it is marital property — subject, to equitable division between the spouses. If the crypto was not acquired during the marriage, then it is separate property. However, the increase in the value of the crypto during the marriage is marital property.

The good news is that Colorado courts treat crypto similarly to any other investment in divorce.

One challenge that commonly arises is valuing and dividing cryptocurrency in divorce. Crypto is highly volatile and may fluctuate 30% or more in a single day. As such, a crypto portfolio’s value may be dramatically different when the divorce is filed compared to when the judge signs the divorce decree. Thus, sometimes it is best to divide the crypto portfolio itself, so valuation is unnecessary.

How Are Crypto Assets Located?

Crypto assets are generally disclosed during discovery. Discovery is the process by which one party requests information from the other party. Divorcing couples must exchange information about all assets and debts, including investment accounts, credit card statements, and cryptocurrency.

Luckily, most crypto investors hold their crypto assets on mainstream platforms, similar to stock. These platforms provide statements of trading activity, and although not always easy to interpret, they do provide a digital trail to follow. Also, transactions to purchase crypto from a mainstream platform may be readily visible on bank statements or credit card statements.

What if my Spouse Fails to Disclose the Cryptocurrency?

While there is no reliable data on how often a divorcing spouse hides cryptocurrency assets, it is safe to assume it is rare. This is because Colorado law places a high value on full and honest disclosure. Thus, spouses usually do not willfully engage in significant financial deception because of the fear of legal repercussions. Moreover, hiding cryptocurrency is much harder than it sounds.

Nevertheless, if cryptocurrency information is not provided in discovery, a review of your spouse’s bank or credit card statements may contain indications of cryptocurrency holdings. For example, if your spouse transferred money to a crypto wallet, such as Binance or Coinbase, this indicates they are investing in crypto. If this is the case, additional discovery requests or subpoenas may be used to acquire the cryptocurrency records.

Colorado law places a high value on full and honest disclosure.

What if my Spouse is the Rare Person with the Knowledge and Desire to Hide Cryptocurrency Assets?

In the very rare case that your spouse owns significant crypto assets and is extraordinarily sneaky and tech-savvy, an expert may be needed to track the crypto down. A spouse may opt to cut out the middleman and hold their crypto on personally-owned hardware wallets. Spouses can store cryptocurrency on “hot” or “cold” wallets. A “hot” wallet is connected to the internet and is relatively easy to locate, due to the methods described above.

On the other hand, the notorious “cold” wallets, where investors often store massive sums of cryptocurrency, are harder to locate. “Cold” wallets are not stored on the internet, but instead, on a disconnected hard drive with a private key. As a result, determining the existence or value of a “cold” wallet is difficult, to say the least, and arguably, it is the best way to hide assets in a divorce.

Thankfully, locating assets on a “cold” wallet is possible through legal means, such as a subpoena or a deposition of the crypto holder. If you believe this is a possibility in your case, you may want to seek legal counsel to explore your options.

Legal Support

If you believe your spouse has undisclosed crypto assets, don’t panic. According to Colorado law, the value will most likely be disclosed to you during the divorce process and divided equitably. In fact, it may be a blessing in disguise because the crypto may be worth more than you think. Bitcoin, for example, has climbed a staggering 9,000,000% since 2010. With the right legal team, locating crypto assets is likely.

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Anastasia EvansAnastasia Evans is an Associate Attorney at Griffiths Law, PC. Anastasia’s practice is focused exclusively on family law related matters including divorce, parental rights, post-decree disputes, and child support matters.

 

 

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