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Bitcoin, cryptocurrencies and divorce

By February 28, 2017No Comments

By Gianna Huesch

Divorcing a less-than-scrupulous spouse and concerned they have not made a full disclosure of assets or have deliberately concealed their true wealth? Have you considered whether they have disclosed all their online assets, including any funds or assets secretly converted to cryptocurrencies?

The division of assets during divorce has been made more complex in recent years with the popularity of online virtual currencies like bitcoin. Bitcoin and other so-called cryptocurrencies are virtual units of currency, operating outside of the banking system, that use encryption techniques to regulate the transfer of funds. What this means for the family courts is that assets, including cash, are no longer simply physical, but can also take the form of purely online assets.

Lawyers around the world are increasingly including digital currencies in financial disclosure orders. For example in the UK, a wife was awarded a huge lump sum after divorcing her supposedly penniless husband, after the judge was satisfied that the husband was hiding considerable assets and had significantly misled the court as to his finances. Similarly, US courts are beginning to issue search and recovery orders of assets to include cryptocurrencies.

Traditionally, currency in dollars is declared as part of the asset disclosure process. Now, parties may be tempted to be more creative in the actions they take to try to reduce apparent wealth. Hiding assets by converting them to cryptocurrency can be done quickly and relatively anonymously, between online wallets or even with friends living outside the jurisdiction, making them difficult to trace.

Unlike bank accounts or shareholdings, bitcoin and other cryptocurrencies can be difficult to link to an individual.  However, people using bitcoin and other cryptocurrencies often feel a false sense of total anonymity and believe they can use the virtual currencies to hide assets, thereby avoiding full disclosure of their financial situation.

But even though the trade in cryptocurrencies can be difficult to trace, at some point when traditional assets were converted into online assets, there will likely be an evidentiary trail that experts can pinpoint.

So if you’re dividing assets in a divorce settlement and you suspect (or know) your ex-partner possesses valuable cryptocurrencies, raise the subject early on in negotiations with your ex’s solicitors, and make sure you obtain expert legal advice in order to protect your rights.

You can read more about cryptocurrencies here: https://www.moneysmart.gov.au/investing/investment-warnings/virtual-currencies

Do you need assistance with a property settlement or other family law matter? Please contact Canberra family lawyer Cristina Huesch or one of our other experienced solicitors here at Alliance Family Law on (02) 6223 2400.

(Please note: Our blogs are not legal advice. For details about how to obtain correct legal advice please arrange a free conference with Alliance Family Law.)

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