By Zoe Worthington, Family Law & Divorce Solicitor at JMW Solicitors | Sponsored Posts
As a family lawyer, I am receiving an increasing level of inquiries from clients about cryptocurrency. The concerns are usually from one party about whether their now ex-spouse can conceal crypto assets during a divorce and how such assets would be accounted for in a financial settlement.
Not so long ago, crypto investment was reserved for my most tech-savvy clients, but the decentralized nature and anonymity of cryptocurrencies have made them an attractive investment for many individuals and they are now much more mainstream. I am seeing more and more that crypto forms part of a couple’s asset base alongside property, business, and pensions.
Challenges and Solutions in Tracking Cryptocurrency
While cryptocurrency is sometimes challenging to track, it is not completely untraceable, and it must be considered during a divorce settlement. A good family lawyer will know how to unearth cryptocurrency and will have the expertise to ensure that it is properly accounted for following the breakdown of a marriage or civil partnership.
Once a couple has decided to separate, before negotiating any financial settlement, it is standard practice for there to be an exchange of full and frank financial disclosure between them. This exercise is intended to quantify the couple’s assets before deciding how they should be divided.
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During this process, my role as a family lawyer is to review and scrutinize your ex’s bank statements, tax returns, and other financial documents identifying discrepancies or unexplained transactions. No stone is left unturned.
In the case of cryptocurrency, if I were to see transactions linked to an exchange, I would request details of all cryptocurrency wallets held and insist upon disclosure of the public key. I would also demand a schedule setting out all cryptocurrencies purchased, sold, or transacted with documentary evidence in support. This would enable me to gain a full understanding of how crypto should be treated in the financial settlement.
If this questioning was met with resistance, then I could work with forensic accountants to further analyze the financial data and identify hidden assets. This can involve the use of specialized software to trace the flow of funds, identify any suspicious transactions and look for patterns that may indicate the presence of hidden assets.
Consequences of Non-Disclosure of Assets in Divorce Proceedings
If a spouse is unwilling to provide this information voluntarily, an application can be made to the court for an order compelling them to do so.
Penalties for failing to disclose assets in divorce proceedings can be severe. In England and Wales, failing to disclose assets, which includes crypto, is considered contempt of court, and the court has the power to impose penalties such as fines or even imprisonment. It is, therefore, crucial to be open and honest about all financial assets during divorce proceedings.
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While cryptocurrency can be challenging to trace, it is important to be aware of transactions that could be hiding assets and requesting further information if these transactions are identified. Seeking the advice of a skilled family solicitor will ensure that those assets have been fully investigated and factored into a fair financial settlement.