Can Cryptocurrency Be Used to Hide Marital Assets?

 Posted on November 26, 2024 in Division of Assets

In 2023, a New York housewife enlisted the help of a forensic accountant to track down half a million dollars her husband hid in Bitcoin prior to their divorce. A few months into the divorce, the wife became suspicious when it appeared her husband – who earned as much as $3 million per year – had very few assets.  The woman, who had been married for over a decade, rightfully felt blindsided when she found out the truth.

Since the couple had never really discussed cryptocurrency or making investments, the wife had no idea her husband was stashing money to keep her from getting her half of the marital assets during the divorce. A 2022 NBC news poll discovered that about 21 percent of American adults have invested in, used, or traded cryptocurrency. Men between the ages of 18 and 49 took the top spot for cryptocurrency investors.

Many divorce attorneys would agree that the law is simply not keeping up with digital assets when it comes to dividing marital assets during divorce. In fact, some attorneys are just beginning to add cryptocurrency to requests for the production of documents during divorce discovery. If there is any silver lining to spouses hiding assets in cryptocurrency, it would be the increase in forensic investigator jobs created to track down these assets during a divorce.

In cases where one spouse is exceptionally tech-savvy – and the other is not, cryptocurrency becomes an ideal way to hide marital assets. If you believe your spouse may be hiding marital assets through cryptocurrency, speak to a Naperville, IL family law attorney from Calabrese Associates, P.C.. Your attorney can help you locate hidden assets, including cryptocurrency.

What to Know About Cryptocurrency

Bitcoin was launched in 2009; the first transaction involved buying two pizzas. Blockchain is a technology that acts as an electronic ledger for these digital transactions. Although Bitcoin's original value was less than a penny, it is now edging toward $100,000. The top three cryptocurrencies are Bitcoin, Ethereum, and Tether. The current value of all existing cryptocurrencies is more than $2 trillion.

Cryptocurrencies are "mined" on computer networks, essentially giant ledgers that record each transaction. Bitcoin mining consumes so much electricity that, as of September 2024, it accounted for about 0.60 percent of the entire world’s electricity consumption.  When first created, cryptocurrencies were virtually impossible to track. In 2014, the IRS stated that cryptocurrencies were to be treated as property for the purposes of federal income taxes.

Why is Cryptocurrency Difficult to Locate?

While one of Bitcoin's core tenets is the public Ledger, which is visible to everyone, a subset of cryptocurrencies is much more anonymous. These "privacy tokens" operate on their own blockchains, with almost all transaction details disguised. This makes it difficult—if not impossible—to trace transactions.

In one divorce case involving cryptocurrency, the couple was in a deadlock over a password-protected crypto fund. One spouse had a password-protected crypto Ledger, which the other spouse found and took. The spouse with the Ledger did not have the password, and the spouse with the password did not have the Ledger. Neither spouse could access the funds without the cooperation of the other.

One investigator claims to have tracked down millions of dollars in cryptocurrency for divorcing spouses since 2018. This investigator said that he is now able to track and trace funds across blockchains using a tool that was formerly only available to the IRS and law enforcement.

Contact a DuPage County, IL Divorce Lawyer

How your marital assets are divided can determine your financial future. This makes the division of assets portion of your divorce extremely important. Speaking to a Naperville, IL divorce attorney from Calabrese Associates, P.C. can be extremely important if you think your spouse may have marital assets hidden in cryptocurrencies.

Attorney Michael J. Calabrese has the experience to help you solve your legal concerns during difficult family law issues. As a highly skilled negotiator, attorney Calabrese will aggressively litigate when necessary and is a former chair of the DuPage County Bar Association Family Law Committee. Contact Calabrese Associates, P.C. at 630-393-3111 to schedule an appointment with one of our knowledgeable attorneys.