Battling Over Bitcoin: How Divorcing Couples Are Fighting Over Cryptocurrency
Mar 16, 2019 16:06
Thought it was just the condo, the cars, and the kids? Think again. Couples are now fighting for custody of bitcoin accounts.
Divorce is often a long, difficult, and ugly processes. Thanks to the technological age, assets that could once easily be hidden, are now almost impossible to keep from savvy lawyers. We’ve all seen the dramas that portray the craven spouse, vowing to go after their former significant other “for everything they’ve got”. Then after a brief montage finding a pile of money hidden away in an account somewhere overseas.
While this seems to be a thick plot line from the 1980’s, lawyers are once again being faced with tracking down seemingly impossible to track funds. Only now, instead of an offshore bank account, scuttled away in the Cayman Islands, nefarious acts of non-disclosure are now coming in the easy to hide, difficult to find form of cryptocurrencies.
“Cryptocurrency is designed to leave a very significant and immutable paper trail. However that trial is entirely anonymous and almost impossible to track to just one person.” Says Ted Reily, a spokesperson for Crypocointrade, an expert site on the matter. Reily says that now more than ever, crypto trade makes it exceedingly difficult to not only track- but value funds. “What could have started out as a $50 investment, can easily transform into thousands if you have someone who is good with the cryptocurrency market.”
The Strings Attached
The market volatility is another thing that’s causing litigious heads to spin. Cryptocurrency is incredibly difficult to value. Many other assets valuation is straightforward - houses, bank accounts, even stock shares all come with a fairly stable value. Whereas cryptocurrency can jump up in value by the thousands- within a single day, and what goes up, as they say. Cryptocurrencies can also plummet at an astonishing rate. Meaning what looks useless one day can be worth a ton of money the next. Most divorce proceedings are long enough that the market can recover handsomely, or plummet catastrophically- leaving many spouses unsure as to whether the online currency is even worth fighting for.
Cryptocurrency is also designed in such a way that there is no intermediary. No big banks taking down personal information. No need to transfer funds from one registered bank to another. Individuals get an online “wallet” that is not linked to any personally identifiable information, instead owners are given a number that identifies their personal hoard. That number is what marks transactions and makes it possible to send bitcoin back and forth between users. While there is a coded ledger (blockchain) that keeps close track of what gets traded where, it’s almost impossible to assign transactions to any one person without knowing their wallet ID.
This is the inherent beauty of crypocurrency. It’s largely anonymous and incredibly secure. It’s also wildly volatile, making it worth thousands, or nothing at all. Transactions can easily be made for cash or direct transfers into bank accounts. More retailers are allowing bitcoin to be used for goods and services. All of which is making for some very exciting investments, but also some shady divorce proceedings more difficult to navigate.
Tools of the Trade
While it is possible to track bitcoin, especially if it was purchased via verified funds from a bank account, it can be incredibly time consuming and expensive to find. “Bitcoin and similar cryptocurrencies can be taken offline. Wallets can be downloaded onto USB devices and saved to trade at a later date. If this happens, there are forensic accountants and IT experts that can search an individual's online history and find these assets- but the process can take an extremely long time. It’s not currently a system that everyone understands well.” Reily tells us.
When given a judgement to split of assets in divorce proceedings, it’s required by law that both partners disclose everything they have. Should a spouse be found in violation of this ruling, they would typically be served an injunction. An injunction prevents a spouse from spending any money. These are usually filed with the couple’s banks and it is the central power of the bank that prevents the individual from spending any of the asset. “Cryptocurrencies are completely without centralized power, which was the whole idea behind them” Reily explains. With no centralized power to enforce these rulings, injunctions are near impossible to obtain with online currency.
However, should a court find out about hidden assets, they will usually rule heavily in favor of the other spouse. Not to mention the individual that lied, or deliberately hid assets can be found in contempt, which can translate to heavy fines and even incarceration in some areas.
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