As cryptocurrency becomes more mainstream, it presents new challenges in divorce proceedings. Spouses may attempt to hide digital assets, making property division more complex. Courts in the United States are increasingly addressing hidden cryptocurrency holdings, using forensic accounting and legal strategies to ensure fair asset distribution.
Understanding Cryptocurrency in Divorce Cases
Cryptocurrency, such as Bitcoin, Ethereum, and other digital assets, operates on decentralized blockchain technology. Unlike traditional bank accounts, cryptocurrency holdings are harder to trace due to anonymity and encryption. However, courts and financial experts are using advanced methods to uncover hidden digital assets during divorce settlements.
Common Tactics for Hiding Cryptocurrency in Divorce
Spouses seeking to conceal cryptocurrency holdings may use various methods, including:
- Transferring assets to anonymous wallets – Moving funds to undisclosed wallets makes it difficult to trace ownership.
- Using crypto mixers – These services blend transactions to obscure their source.
- Underreporting holdings – Failing to disclose cryptocurrency assets in financial affidavits.
- Investing in NFTs or other blockchain-based assets – Some spouses invest in non-fungible tokens (NFTs) or other digital assets to disguise wealth.
- Using offshore crypto exchanges – Transferring digital currency to platforms outside U.S. jurisdiction can complicate discovery.
- Trading crypto for goods or services – Converting crypto holdings into assets that are harder to track.
Legal Strategies for Discovering Hidden Cryptocurrency
Courts and legal professionals employ various techniques to uncover undisclosed crypto holdings, including:
- Forensic Accounting: Specialists analyze blockchain transactions and financial records to track hidden assets.
- Subpoenas for Exchange Records: Courts can request transaction history from platforms like Coinbase, Binance, or Kraken.
- Tax Return Examination: Cryptocurrency transactions must be reported to the IRS, providing clues about hidden assets.
- Discovery Process & Affidavits: Attorneys can compel spouses to disclose financial holdings under oath.
- Blockchain Analytics Tools: Advanced software can trace blockchain transactions even if they have been moved through multiple wallets.
Scenario-Based Examples
Scenario 1: The Hidden Bitcoin Stash John and Lisa are divorcing after ten years of marriage. Lisa suspects John has been investing in Bitcoin but does not see it listed in their financial disclosures. With the help of a forensic accountant, she discovers John’s cryptocurrency transactions on his bank statements. The court orders John to disclose and divide the assets fairly.
Scenario 2: NFT Investments as a Cover-Up Mark buys expensive NFTs under the pretense of “art collecting,” but in reality, he’s hiding marital assets. His spouse, Sarah, hires a forensic accountant to investigate blockchain transactions linked to Mark’s digital wallet. The court recognizes the NFTs as marital property and includes them in the division of assets.
Scenario 3: Transferring Crypto to a Third Party Emma transfers her cryptocurrency to a friend’s wallet before filing for divorce to make it appear as if she owns less. However, the court subpoenas transaction records and traces the transfer, deeming it a fraudulent attempt to conceal assets. Emma is penalized and must equitably divide the cryptocurrency.
Scenario 4: Offshore Crypto Exchange Trick David opens an account with a foreign cryptocurrency exchange that does not comply with U.S. subpoenas. His spouse, Megan, suspects deception and hires a digital forensic expert. By analyzing blockchain transactions, the expert connects David’s on-chain activity to the offshore exchange. The court rules that his failure to disclose these assets amounts to financial misconduct.
How Courts Decide on Cryptocurrency Division
Once cryptocurrency is identified as a marital asset, courts use different approaches for division:
- Equal Division – Some states follow a 50/50 split for marital property.
- Equitable Distribution – Courts consider factors like contribution, income disparity, and fraud before deciding the split.
- Offset with Other Assets – If one spouse keeps the cryptocurrency, the other may receive equivalent value in real estate, cash, or other assets.
- Tax Considerations – Courts assess potential tax implications of crypto transactions to ensure fair division.
How can we assist?
Cryptocurrency adds complexity to divorce settlements, but courts are evolving to handle these challenges.
At our firm, we have extensive experience assisting clients with divorce cases. Our team includes a board-certified family law attorney, with advanced business degrees, and a specialist in negotiation and mediation. Contact us at 832-538-0833 to schedule a consultation and get personalized legal advice on your situation.