New York High-Net-Worth Divorce: The Role of Cryptocurrency in Asset Division
Cryptocurrency has become a decisive factor in many highly-publicized millionaire divorces. Bitcoin and other digital currencies have become a magnet for spouses looking to hide assets from their soon-to-be exes.
Because crypto is held at no bank and controlled by no central authority, a husband or wife could hold millions of dollars’ worth of digital assets in utter secrecy. Accessible with a code that does not identify the owner´s name, Bitcoin, Ethereum, and other popular digital currencies are ideal for hiding wealth to prevent it from being divided between spouses at the end of a marriage.
In New York, Florida, California, and other jurisdictions with a significant population of high-net-worth businesspeople, athletes, artists, and top-level politicians and professionals, divorce attorneys are working with financial advisors and forensic accountants to try to find assets being hidden from one of the parties during divorce. High-profile attorneys in these jurisdictions told reporters that crypto has come to play a role in between 20% and 50% of their clients’ divorces.
It is not uncommon for a husband or wife to invest millions of dollars in crypto without telling their spouse. And we are increasingly seeing this in our Manhattan practice.
Aside from the fact that subpoenas will not reveal ownership of crypto and it is very difficult to track down, there is also the problem of volatility. The value of crypto changes too fast, especially considering the time courts can take to make decisions about asset division. For instance, a seemingly convenient agreement can become disastrous if the price of the crypto a spouse is going to receive as part of the divorce settlement decreases dramatically.
Experienced high-net-worth divorce attorneys are prepared to navigate all these complexities, working with crypto specialists to track down digital assets and secure equitable distribution.
High-Income, Few Assets
When one spouse makes millions of dollars a year, spends much less, and has few assets to show for their massive income, you may be looking at a case of hidden crypto.
In one recent case, a New York housewife found out her husband had few assets to divide during divorce. This was suspicious because the man made $3 million per year. With the help of crypto trackers, the woman was able to discover $500,000 worth of Bitcoin in a hidden crypto wallet.
Between cryptocurrency, NFTs, and other metaverse properties, there is now a wide array of virtually untraceable instruments for hiding assets in high-net-worth divorce. With more and more Americans dabbling in crypto today, this strategy is now accessible to a large portion of our society, especially to people with large disposable incomes.
Cryptocurrency Basics
If you suspect your spouse may be hiding cryptocurrency during divorce, the first thing to do is educate yourself about the potential implications of this type of situation.
There are thousands of cryptocurrencies in circulation. Digital coins and tokens are usually stored on the blockchain, a cryptography-based platform that records transaction data as interlinked blocks. Decentralized blockchains are not controlled by any authority. Instead, all their users collectively maintain control. Once transaction data is recorded on the blockchain, it can't be altered. Typically, any user can view transactions on the blockchain, but they include no identifying information. So, you may see Bitcoin was transferred, but you won't see from whom to whom.
Investors are flocking to crypto because it is a highly liquid asset. There are generally no fees for transferring or using crypto, and prices have been known to rise spectacularly. Some crypto exchange platforms collect fees, but they are always significantly lower than the cost of moving money around using traditional financial institutions.
Ultimately, while transferring millions of dollars can be a costly and complicated process when using banks, it can be done in minutes using crypto. This characteristic has made digital currencies extremely attractive for criminals looking to launder money and spouses looking to hide assets during divorce.
Crypto in a High-Net-Worth Divorce
Court orders won't reveal how much crypto a spouse is holding. A court can order banks to reveal how much is in a person's bank account if they are trying to hide assets during divorce, but no single institution is capable of doing the same for crypto. The whole crypto industry is built on the concept of total independence and anonymity. In fact, some cryptocurrencies have built their success on being 100% anonymous and untraceable.
Only the person who has the private key controls crypto assets. And even after they have been located, courts can find it tricky to act upon the discovery. With the right tools and expertise, it is possible to trace crypto and secure equitable division of assets in divorce court.
If an original crypto wallet address can be obtained, crypto tracking experts can often follow the traces of transactions through different crypto wallets and platforms. Sometimes, looking at bank accounts, ATM transactions, and purchases can reveal links to crypto platforms that can help specialists track crypto ownership and transactions. It is sometimes also possible to find records of cryptocurrency income in tax returns.
Is Tracking Hidden Crypto Worth The Effort?
Tracking crypto is quite an endeavor. If you suspect your spouse is hiding only a minimal amount, the cost of the search will likely be higher than your potential share of the hidden crypto assets.
Blockchain forensic experts can conduct thorough investigations and track the trajectory of crypto through multiple platforms. When they successfully locate hidden cryptocurrencies on an exchange, courts can block them and seize them. Often, when spouses trying to hide assets realize they have been caught, they will be ready to negotiate a more convenient divorce settlement.
Bitcoin and other digital currencies that are not held in exchanges can be harder to track, but when they are kept in cold wallets and other similar devices, advanced device forensics can also help track them down.
Ultimately, if you suspect there is hidden crypto, a team of experienced high-net-worth divorce attorneys can enlist the services of forensic analysts and investigators and advise you on the best course of action.
Not all crypto is created equal. Different digital coins and platforms present different challenges and behave differently. And if your spouse is using crypto to deprive you of your rightful share of the marital property, you should definitely seek counsel from an attorney with the right expertise to uphold your interests.
As the law tries to catch up on the unique complexities of crypto asset division during divorce, high-net-worth divorce attorneys are leading the way and paving the road for fairer, more transparent asset division during highly contested divorces.