And…How Can I Find Hidden Cryptocurrency?
If you saw indications of cryptocurrency or discussed it or saw money transfers for the purchase of cryptocurrency during your marriage, that is a good indication that something exists. The concern becomes if your spouse did not disclose the existence of the crypto through his or her financial disclosure. It is a difficult asset to trace, which is what entices some people to invest in it, but that does not mean that it evades discovery and disclosure in a divorce case.
How can we as divorce attorneys help you locate cryptocurrency (or other hidden assets)?
There are many ways we go about conducting a financial investigation, but I have some tips that I have found particularly helpful in my practice. Almost half of the divorce cases I’m involved in have issues of either undisclosed assets, concerns that financial information will not be disclosed or a failure to provide a full and complete disclosure, even if the errors were by negligence or a lack of understanding rather than intentional. The following are the best tips I’ve compiled in addressing these concerns.
Tip 1: Look for transfers into or out of bank accounts.
Generally, whether you review transaction history or you have to work with your lawyer to subpoena or obtain the bank records, they will be available to you to review. Upon review, finding unknown transfers into or out of a bank account is often a good source of tracking funds and money to determine its location. If you see a wire transfer and you’re not clear about the company the funds were transferred to, sometimes doing a google search will help clarify the company. If it is an unexplained transfer, however, you should note the date, the amount and the company it was transferred to so the funds can be followed up on and further tracked. In some situations, cryptocurrency is paid/purchased through payment apps/mediums such as venmo, paypal or cash app. If you are concerned about this, of course through discovery, purchase histories/fund transfers through such payment websites can be requested.
Tip 2: Emails from a cryptocurrency holding company.
When cryptocurrency is purchased or funds are placed in an electronic wallet, an email is sent to the owner of the wallet. If you have seen these types of emails to a common or shared email address or seen them printed around your home, it is a good indication that your spouse’s ownership of cryptocurrency should be further investigated.
Tip 3: Has your spouse discussed cryptocurrency with you?
Often, in the normal course of a marriage, if your spouse is invested in or interested in cryptocurrency, he or she will discuss following the information, changes or fluctuations in value and other similar details. If you have had discussions about cryptocurrency or other digital or electronic assets, it is important that you share this information with your attorney.
Tip 4: Review your tax returns!
This is a great tip for discovering information for many kinds of assets. Cryptocurrency is required to be disclosed (if capital gains or losses are received) on Schedule D (form 1040) and on form 8949 if assets are sold or otherwise disposed of. Tax returns are frequently a great repository of information and can be a wonderful tool for cross-referencing the accuracy of financial statements and disclosures made in the divorce process.
On this note, in some households, Cryptocurrency wallets can actually be located through finding a USB drive or external hard drive. If you believe that evidence of cryptocurrency is contained on such hard drives or other USB drives, it may be a good idea to review them to determine if relevant information is contained on such electronic storage.
Tip 5: work with an attorney who knows how to discover assets!
Hopefully, your spouse is honest before it gets to the point of involving your lawyer, however, when needed, there are actions we can take to search for undisclosed assets. These steps may include seeking discovery information, subpoenaing electronics or electronic accounts or even having a forensic specialist review and provide information. While the process of involving a forensic specialist can be costly, if you suspect there may be significant undisclosed assets, it may be worthwhile. We simply want to ensure that the estimated cost to involve an expert is not likely to outweigh the value of the assets we are trying to discover.
What are some different types of cryptocurrency?
In terms of bitcoin, there are many different types and they are developing new kinds all of the time! Some examples are: Ethereum, XRP, Dogecoin, Tether, Cardano, Chainlink and Litecoin.
How is the value of cryptocurrency determined?
It goes up and down largely based on supply and demand. Essentially, if the value of cryptocurrency you are holding goes up, it means that someone is willing to pay more than you paid to have it.
How is Cryptocurrency purchased?
There are many online databases and platforms that allow for the purchase of cryptocurrency. Some commonly used ones include: Robinhood, Kraken, Coinbase, Binance, CashApp, and Venmo.
What is a Ledger and How is that Helpful?
A ledger is a system of money in and money out in a digital wallet holding cryptocurrency. Often requesting this information through discovery is a helpful tool to have a full accounting of all of your spouse’s holdings.