A few days separated two recent Forbes headlines about volatile cryptocurrency: “Crypto Price Prediction: Bitcoin Could Hit $100,000 In 2021 But This Bank Sees Ethereum Soaring 10-Fold,” said the publication on Sept. 20. By Sept. 24, a bucket of ice water had been dumped on those who’d purchased cryptocurrency based on the euphoric first headline: “Crypto Markets Wipe Out $150 Billion In Value Within Hours Of China’s Latest ‘Bitcoin Ban’—What’s Next?”
Profits can turn to gloom
That’s what life is like in the world of crypto investment. A wild rollercoaster ride of exhilaration and enormous profits, often followed by steep declines and gloom.
There are some investors in digital currencies looking for more than big returns, however. They’re buying Bitcoin, Ethereum, Dogecoin, Stellar and others in order to hide assets during a high net-worth divorce.
Because Nevada is a community property state, courts will usually divide marital assets equally. But those who fail to fully disclose their financial information run the risk of seeing the court alter asset division in favor of their spouse.
Experts say more than 20 million Americans own cryptocurrency – a market that topped $2 trillion in April this year.
The hardest part of the hunt
New York family law attorney Sandra Radna told financial news network CNBC that the hardest part of tracking down hidden cryptocurrency assets is its first step: determining whether a spouse bought crypto. “And then, once you have that suspicion, to go after it,” Radna said.
If a spouse believes there’s been a significant crypto investment, a divorce attorney can pursue access to their spouse’s computer or phone with a court order, she said.
A forensic analysis of those devices might reveal stored digital ticker symbols or login credentials for crypto brokers or exchanges or records of crypto income or transfer activity on bank statements.
Radna said there can be evidence of crypto gains on tax returns and on loan applications, too
There can be challenges, of course, in tracking down crypto. Foreign exchanges, for instance, and some newer, more anonymous cryptos can complicate the process.
Is it worth it?
Because the pursuit can be time-consuming and require the services of digital-data specialists, it can be expensive, too.
“We’re looking for people that have made significant amounts of money for it to be worth the investigation,” Radna said. “If it’s $5,000 [of cryptocurrency], it’s really not worth it.”
That means that a spouse who suspects that assets have been hidden should discuss the costs and potential benefits of a search with qualified legal representation.