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Tracing cryptocurrency in a divorce

On Behalf of | Mar 18, 2019 | Divorce

The divorce process for some Texas couples may be more complicated if one or both partners own cryptocurrency assets. Most people both in and out of the legal system are unfamiliar with cryptocurrency, and the asset can be both easy to hide and difficult to valuate.

Cryptocurrencies purchased through an online exchange can generally be traced; although, even this can be challenging for people who are unfamiliar with the asset. By studying bank statements, one financial expert found $100,000 in a cryptocurrency investment that a husband did not disclose in a divorce case. Cryptocurrency that is purchased directly instead of on an exchange and then moved offline can be nearly impossible to trace. However, consequences for hiding assets can include having to pay a larger share to a spouse or going to jail for contempt of court.

Assessing what cryptocurrency is worth for the purposes of property division is difficult because its value can fluctuate so much. For example, a British attorney reported in one case that cryptocurrency purchased in November 2016 for £80,000 reached a value of £1 million but had fallen to £600,000 by February 2018. His suggestion was that valuations of cryptocurrency should be done several times as a divorce progresses. Another attorney has suggested that property division should be based on value at the time of distribution.

If one spouse owns cryptocurrency, but it was purchased after the marriage, it will generally be considered shared property. This means that the other spouse in a divorce could be owed half of its value. There are a number of other ways spouses may attempt to hide assets. A person might simply take cash out of a bank account, or there could be an elaborate deception in place involving shell companies or offshore accounts. A divorce lawyer could help a client find out if any assets are being hidden.