Fraud Blocker

Hiding Crypto During Divorce: Why It Doesn’t Work

Cryptocurrency is a controversial subject, both in the media and in many marriages. Couples often disagree about whether cryptocurrencies or crypto are worthwhile investments. While there are no hard numbers on how many divorces are caused partly by crypto, there is information on how often it is involved in divorce settlements. According to a report by CNBC, cryptocurrencies may be involved in anywhere from 20-50% of divorces.

If cryptocurrencies were like any other investment, this would be less noteworthy. But crypto isn’t like most other assets. By its very nature, it’s harder to find and easier to “lose.” That makes it particularly tempting for investors to try to hide their cryptocurrency during their divorces. In fact, one woman recently found her high-income spouse was attempting to hide half a million dollars of Bitcoin in an undisclosed wallet. 

Hiding assets violates California’s community property laws, regardless of the type of property involved. In California, all assets a couple acquires during a marriage are considered their joint property. Crucially, community property needs to be divided equally in a divorce. Concealing investments or other property to prevent them from being considered during asset division is unlawful and can lead to serious penalties. 

If you or your spouse has invested in crypto, it must be disclosed during your divorce. Otherwise, you risk an unfair division of assets and potentially even legal penalties. But why do people choose to hide crypto during divorce over other assets?

Why People Hide Crypto During Divorce

There are two common reasons people hide certain assets during divorces: fear and greed. 

  • Fear of losing assets: Many worry that their divorce will prevent them from maintaining the lifestyle to which they’re accustomed. They may conceal assets to give themselves a bigger cushion and make themselves feel more secure at their spouse’s expense.
  • Desire to hide wealth: Others simply want to “win” the divorce or “punish” their spouses. These people will conceal property just to keep their partners from getting a fair split, even if they aren’t concerned about their budgets.

These are the fundamental drives behind concealing any asset during a divorce. However, crypto is a particularly tempting target for this kind of fraud. Why? Because there is a persistent belief that crypto is untraceable. In other words, many investors assume they can’t get caught hiding cryptocurrency, so they think it’s risk-free despite being illegal.

Consequences of Hiding Assets During Divorce

So, what are the penalties for hiding assets? That depends on the specific circumstances. If your spouse tries to hide crypto investments from you, they could face the following:

  • Legal repercussions: Purposefully lying in a divorce-related financial disclosure can be grounds for a contempt-of-court charge. The judge can use their discretion to assign penalties for contempt of court, from ordering your spouse to give you half of the hidden asset to dismissing your spouse’s claims and granting you yours. 
  • Costly penalties: Additionally, your spouse could face fines and may be ordered to pay your attorney fees and any costs associated with finding the hidden asset from their share of the marital estate.
  • Damaged reputation: After their deception is discovered, your partner will lose any goodwill the judge may have had for them, which can work in your favor.

These penalties can seriously impact the outcome of a divorce. However, some investors will try to hide crypto anyway because they assume there’s no way their deception will be uncovered.

Why Hiding Crypto During Divorce Doesn’t Work

Despite the common belief that cryptocurrency is untraceable, tracking down hidden investments has become increasingly easy. Even if your partner is trying to conceal these investments, you can still track them down with the following tools:

  • Technology advancements: Cryptocurrency has become mainstream, so technology has developed to make tracking easier. While a specific wallet may still be anonymous, the nature of the blockchain means there is a clear path to identify the wallet involved in a particular transaction. Now, dedicated tools are available to track down wallets and identify the people who own them, which can help you determine whether your spouse has an active wallet. 
  • Tracing transactions: Similarly, currencies on the blockchain automatically maintain a record of what wallet made a transaction and when. If you know that your spouse invested in crypto but refuses to declare it, you can use transaction tracing to identify the coins they purchased, find their wallet, and confirm if they still own those coins today.
  • Forensic accounting: Bitcoin and similar currencies have been around long enough for accountants to catch up. There are now forensic accountants who specialize in helping people track down crypto through a variety of accounting techniques. You can work with a forensic accountant to confirm whether your spouse ever invested in crypto and identify their wallets if they exist. 

These tools make hiding cryptocurrency significantly harder than it was just a few years ago. If your spouse is trying to hide a wallet, you have an excellent chance of finding it and ensuring you receive your fair share of the assets anyway.

Get Expert Legal Counsel During High-Asset Divorces

You have the right to half the community property in your divorce. That includes any cryptocurrency your spouse may have purchased during your marriage. If you suspect your spouse is trying to hide crypto investments on their financial disclosure, you may benefit from talking to the skilled high-asset divorce attorneys at Kaspar & Lugay LLP.Our attorneys specialize in helping clients fairly and efficiently divide all types of community property. We understand how crypto investments can impact your divorce settlement, and we’re dedicated to helping you achieve the best possible outcome from your split. Learn more about how we can help you if your spouse is trying to hide assets by scheduling your consultation now.