Family-Focused Advocacy & Counsel
Responsive & Accessible Representation

banner image

Bitcoin: the electronic way to hide assets during a divorce

| Apr 22, 2018 | Blog |

If you and your high-asset spouse are embroiled in a Connecticut divorce, you may worry or even suspect that (s)he is hiding assets so as to slant the property settlement in his or her favor. Hiding assets is nothing new for spiteful and/or greedy spouses who wish to keep their partner in the dark about their true financial picture. What has changed with the advent of technology, however, is the way in which many of these spouses go about doing it.

Are you familiar with Bitcoin? If not, you definitely should educate yourself about this oldest and most widely known of today’s cryptocurrencies. This virtual currency did not even exist until 2009 when a mysterious person going by the name of Satoshi Nakamoto introduced his revolutionary new product to the world. To this day no one knows who Satoshi Nakamoto is or was, but an ever growing number of people worldwide have bought, traded, and purchased goods and services with Bitcoin in the past nine years.

Where Bitcoins “live”

The thing to remember about Bitcoin and the other cryptocurrencies is that they are not real money even though people use them like real money. You cannot see them or touch them; they exist only in the virtual world, i.e., as entries in electronic files. These files, called wallets, themselves exist on a Bitcoin owner’s computer, external hard drive, thumb drive, smartphone or possibly in the cloud. They are hard to find and even harder to trace.

To make matters even more difficult for you if you are trying to determine if your spouse is hiding assets by means of Bitcoins, sophisticated cryptocurrency owners maintain several wallets and transfer their virtual money from wallet to wallet. In addition, the accounts to which the “money” is linked may be in foreign countries as well as in the United States. This feature conveniently places them overseas, generally out of reach of the IRS or anyone else, and therefore makes them even more difficult to discover, let alone track.

Where and how to buy Bitcoins

Since everything related to cryptocurrencies is electronic, the most readily available places to purchase them are on online exchanges. Opening a Bitcoin account is simple, almost instantaneous and almost completely anonymous. All you need is an email address, whether or not it reveals and reflects your true identity. In theory, you must link all U.S. Bitcoin accounts to a valid bank account, debit card or credit card, thereby requiring some personal identification, but many foreign exchanges do not require even this.

In addition, many U.S. exchanges let you buy Bitcoins for cash. You can do this through PayPal or even literal cash that you withdraw from one of the numerous Bitcoin ATMs located throughout the country and then deposit in the seller’s bank account at one of his or her bank’s branches.

Fluctuating value

In one very important respect, Bitcoin and the other cryptocurrencies such as Ethereum, Ripple, Monero and Litecoin are more like stocks than currencies. Their value can and does fluctuate, sometimes wildly and often from day to day, if not hour to hour. A single Bitcoin has a current USD value of $7,876.00, but who is to say what its value will be at the time of your divorce finalization?

This inability to place a true value on them is another excellent or debilitating feature of Bitcoins depending on which side of the property settlement issue you are on. How can you determine your family’s overall financial worth if you cannot assign a realistic value to significant assets, assuming you find them in the first place?

Your best strategy if you strongly suspect that your spouse is hiding assets is to hire a forensic accountant. His or her specialized training in hidden asset discovery and valuation is your best chance of finding out if and to what extent such assets exist.