We don’t mean to brag but dividing assets like cash, stock options, and other quantifiable properties during a divorce process is something we can do in our sleep. It’s only a matter of time before a client steps into our Renton office and asks how to go about dividing cryptocurrencies. For that, we’d have to stay completely awake.
That’s not to say we don’t have any expertise on the matter. In fact, we’re devoting an entire blog to talk about the thorny aspects of divorces involving digital coins.
How cryptocurrencies can mess up the divorce process
Bitcoin is a decentralized and encrypted digital currency that can be used in exchange for goods, services, and other currencies. Although it’s possible to track Bitcoin transactions through a “distributed ledger,” an online database of all transactions, there are numerous ways to ensure its usage and ownership remain completely anonymous.
Since its launch in 2008, Bitcoin has risen in popularity and inevitably became part of many couples’ joint properties. However, unlike assets such as savings, stocks, and bonds, cryptocurrencies throw a wrench into an already messy divorce process for two main reasons:
- It’s volatile - Cryptocurrency values constantly fluctuate. For example, Bitcoin’s value can surge as high as $1,000 in 24 hours, and go down just as fast. Values can change wildly in the course of your divorce, making asset division particularly challenging.
- It’s anonymous - Spouses are required to fully disclose their assets in a divorce process. But with cryptocurrencies in the mix, dividing assets can be more difficult since one can attempt to understate or hide assets converted to Bitcoin. And although cryptocurrency ownership is not impossible to track, the process of unearthing them could take more time and cost more money.
Our two cents for separating couples who have cryptocurrencies are as follows:
Disclose all your assets, including the contents of your online wallet
It’s tempting to hide or understate your assets during a divorce, but don’t do it. You wouldn’t want to follow the example of Denise Rossi who wanted to pocket every penny of her $1.3 million winnings in the California Lottery 11 days before getting divorced.
Naturally, she wanted to keep the entire amount to herself. Since it happened in 1999 (way before the internet was invented), she thought she could keep it a secret. But as fate would have it, her husband Thomas got his hands on the letter containing details of her winnings.
Denise eventually admitted to the court of concealing her prize, and the judge ruled that she violated state asset disclosure laws. As a result, her dutiful and loyal ex-husband Thomas ended up pocketing the entire amount.
This is a comedy of errors we’d pay to see.
Needless to say, lying about your assets is illegal -- something to bear in mind in case you want to hide your stash of digital cash. In fact, digital forensics experts could be called in to investigate cases where a party is suspected of hiding cryptocurrencies.
Keep track of your cryptocurrencies’ value
As mentioned earlier, Bitcoin is notoriously volatile, so you won’t be fooling anyone when, during a divorce, you declare that your assets consist only of a couple ‘coins.’
There are already several divorce cases involving cryptocurrencies, but one case in the UK stands out due to the large amount involved. The couple is fighting over their joint Bitcoin crypto-investments, which ballooned to $830,000 (￡600,000) from $110,000 (￡80,000). It is challenging to litigate, to say the least, as there are currently no laws that govern such cases.
The couple is now “seeking the disclosure and a potential share of cryptocurrency assets.” We are keeping our eyes peeled, but it wouldn’t be surprising if the court orders to convert the assets into easily quantifiable properties that can be more easily divided.
Buckingham, LaGrandeur & Williams divorce attorneys have more than enough experience divvying up marital assets. And when it comes to splitting assets and coming to an agreeable settlement, our advice is to fully and honestly disclose all your assets. Leave the complex maze of Bitcoin tracing and valuation to us.