Cases of spouses choosing to hide assets during a divorce are not a new development but utilizing cryptocurrency such as Bitcoin as a means hiding wealth is. Determining ownership of those cryptocurrency assets accurately without missing a large chunk of the assets is no easy task. But divorcees are having a far more basic problem before they get anywhere near that stage. They are encountering major problems and difficulties determining and identifying if their spouse has any cryptocurrency to begin with.
Why Cryptocurrency Is Difficult to Identify
Identifying if there are cryptocurrency assets in a divorce isn’t always a complex and convoluted process, but given how effective Bitcoin and other cryptocurrencies are as a means of hiding wealth, identification can often prove to be difficult to impossible for anyone without the necessary expertise.
At a basic level, cryptocurrency ownership isn’t readily identifiable since people don’t typically hold their cryptocurrency with an institution but instead hold it in a wallet of theirs which only they control access to. This wallet doesn’t have their name on it nor any identifier that suggests who might control it.
But before tracking and identifying cryptocurrency wallets and addresses themselves, we first need to assess how an individual may have acquired the cryptocurrency assets to begin with. If a person going through a divorce suspects their spouse may be hiding cryptocurrency, they’re obviously not going to know any wallet addresses at this stage!
Learning about Cryptocurrency Ownership
How do you know if your spouse has invested in cryptocurrency at all? In 99% of cases, an individual can determine whether or not their spouse has invested in cryptocurrency based on past conversations they’ve had with them or things they’ve overheard. In all likelihood, they will either be quite vocal of cryptocurrency (even if they didn’t explicitly state investment) or will have been vocal about it in the past. Even those that aren’t so vocal do often refer to it and follow news related from cryptocurrency from time to time and demonstrate some level of knowledge in the area which in turn strongly suggests they own at least some cryptocurrency.
There are other methods one can utilize to learn about possession of cryptocurrency by a partner or spouse, including by examining bank account statements as but one example. But the reality is the people who own cryptocurrency are seldom quiet about publicly, on social media, and especially to close friends and family.
Identifying Cryptocurrency Acquisition Methods
In such instances where a spouse is suspected of hiding assets in the form of cryptocurrency, we therefore need to first determine how a spouse may have acquired cryptocurrency, and that’s not as easy as it may sound. The spouse may have secretly used martial assets to invest through a variety of possible methods, they may have used non-marital assets to invest, or they may not have invested at all but acquired it through other means. Potential acquisition methods include:
- Investment via a cryptocurrency exchange – the most common method, typically funded through a bank account or credit card
- Investment via a Bitcoin ATM – typically funded through a bank card or cash
- Investment via a broker or OTC (Over-the-counter) Dealer – typically funded through cash
- Investment via a friend or P2P (Person-to-Person) – typically funded via cash or electronic money transfer
- Cryptocurrency Mining – no cryptocurrency investment involved, however in most cases the individual would likely have invested in expensive mining equipment rather than using a regular computer
- Earning Income in Cryptocurrency – from an employer or from self-employment and/or contract work
- Earning cryptocurrency from a bounty campaign, airdrop or reward
- Liquidating or selling other assets for cryptocurrency e.g. utilizing craigslist
- Theft of cryptocurrency through fraud or hacking – A fairly common incident we deal with since very few people actually employ adequate security practices to properly secure their cryptocurrency e.g. not utilizing app-based 2FA, improperly storing backups
- Soliciting ‘Investment’ and/or scamming – investment fraud and scams are rife in the cryptocurrency space, and those who are good at it can ‘earn’ significant amounts of cryptocurrency, illegally of course
Accurately identifying cryptocurrency acquired, through investment or otherwise, is not as intuitive as it may seem at first. Even when combing through bank account statements, it can be difficult to know what to look for since it some cases it does not explicitly state names of cryptocurrency exchanges as a recipient, but rather a holding company or payment processor utilized in some cases. Although it’s wise to consult an expert for such matters, it’s understandable that a divorcee would at least want to have some evidence or reason to believe the spouse may have cryptocurrency before hiring an expert or investigator.
However, once there is reasonable suspicion or even some evidence indicating cryptocurrency ownership, it’s wise to consult an expert to identify hidden cryptocurrency assets in divorce cases accurately. In all likelihood, the expert will be able to assess what information gathered thus far is useful, and will likely be able to uncover additional cryptocurrency investment that was previously missed or overlooked.
Tracking and Investigation
Since the spouse’s Bitcoin and cryptocurrency wallet addresses are typically not known at the outset of the investigation, it’s important to identify acquisition methods that will either uncover the wallet addresses or lead to the discovery of them e.g. via a cryptocurrency exchange. Once at least one cryptocurrency wallet address can be identified, an expert can utilize blockchain forensics to track cryptocurrency relevant to the divorce.
In all likelihood, a properly conducted investigation will lead to the discovery of many, if not all of an individual’s cryptocurrency wallet addresses (for each cryptocurrency, not just Bitcoin) and their applicable value. It will also likely lead to the discovery of additional funding methods that have not been discovered thus far that were otherwise missed. The investigation should do this in a facts-based manner so there’s no room for dispute; fortunately, blockchains and immutable and transactions can’t be censored, so past activity cannot be hidden from the court or investigators.