Divorce and Bitcoin: Is My Spouse Hiding Their Cryptoassets from Me?

Bitcoin divorce court

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Divorce can be an emotional, messy and complicated business, especially when it comes to splitting assets.

Dividing up cash and investment portfolios is often the most contentious issue in divorce proceedings and many people spend tens of thousands of pounds on legal fees to secure what they believe to be rightfully theirs.

Hiding assets is an age-old problem, but instead of bags of cash in a safety deposit box people are increasingly using Bitcoin and cryptocurrency wallets as a way of dodging divorce settlements.

Before the advent of digital currency, hiding assets was harder because generally there was a much clearer paper trail to follow.

However, the semi-anonymous nature of Bitcoin and other digital currencies, together with the unregulated nature of the cryptoassets marketplace are presenting new challenges for solicitors and the Family Court.

There is growing industry of digital investigators who specialise in hunting for hidden cryptoassets because people often unwittingly leave a digital trail when attempting to hide them.

How can I tell if my husband or wife is hiding cryptocurrency from me?

There are several tell-tale signs that a spouse is hiding digital assets such as Bitcoin, Ethereum or Litecoin from them.

They include:

  • A partner previously talking about investing in cryptocurrencies
  • Bank statements showing transactions involving cryptocurrency exchanges
  • A hardware or paper Bitcoin wallet that has since disappeared
  • Claims that the spouse no longer invests in digital assets
  • Obvious displays of wealth that do not reconcile with stated income

How can I find my spouse’s hidden Bitcoin during divorce proceedings?

The main way that hidden Bitcoin and other cryptoassets are discovered is using forensic accountants or specialist digital investigators, often appointed by your divorce solicitor.

They will look for a digital trail that points to cryptocurrency ownership. This includes:

  • Bank statements and financial transactions
  • Evidence of digital wallet address and blockchain entries
  • Activity linked to cryptocurrency exchanges
  • Use of Bitcoin ATMs where your can convert fiat money to cryptocurrency

However, before pursuing this course of action, you need to consider how large you think your partner’s digital asset portfolio is.

Accountants and investigators can be very expensive, and you could end up diminishing any potential gain or even losing money by pursuing this route.

Alternatively, if your spouse’s declared assets are significant to the point of providing for all your needs without the addition of any potential cryptoassets, then you may decide against pursuing full disclosure on the issue of Bitcoin.

If you think your spouse is transferring money to cryptocurrency to hide it from you, it may be possible to seek an injunction to freeze all assets at this time.

Remember that HMRC also considers cryptocurrency to be a taxable asset meaning there will be financial implications of selling the investment to divide it, such as Capital Gains Tax.

What if my spouse says their cryptocurrency has been lost, hacked or stolen?

If you confront your spouse about their cryptocurrency and they claim it’s been lost or stolen, the onus is on them to prove it.

For example, if the cryptoassets were on a hardware wallet that your spouse claims was stolen, there should be clear evidence of this, such as police report.

Likewise, it’s very difficult to simply ‘lose’ your cryptoassets, so the court requires detailed evidence of how this happened.

Keep an eye out for signs that your spouse isn’t being completely honest, especially regarding assets that they’ve previously mentioned.

What are the penalties if I don’t declare my Bitcoin or cryptoassets in court?

UK divorce courts take a dim view of anyone who attempts to hide assets during divorce proceedings.

Additionally, proceedings can be reactivated many years later if documents come to light suggesting that a spouse didn’t declare all their assets.

Penalties for hiding assets include:

  • A judge awarding a far greater amount of disclosed wealth to the other party if hidden cryptoassets (or other assets) are suspected
  • You can be found guilty of contempt of court if you fail to make a full financial disclose to the court, including any cryptoassets you may hold, on your Form E
  • The court can freeze your assets or penalise you with greater court costs
  • You can potentially end up facing charges in a criminal court

How do I value my cryptoassets during divorce proceedings?

Assuming that your spouse has declared their cryptoassets, preparing a valuation is a straightforward process.

You’ll need the wallet address where the cryptocurrency is held, together with the amount of Bitcoin or other coins in these wallets.

You can then obtain a current market valuation from any number of places, including Bitcoin exchanges and even Google.

The volatility of cryptocurrency can present a problem when valuing the asset. There are a couple of ways to solve this:

A settlement can be reached on a percentage of the cryptoasset which is then transferred to the other party

The spouse without the cryptoasset agrees on a larger percentage of another asset and waive their interest in the cryptocurrency

I’m about to get married – how can can I protect my cryptoassets?

This is a common concern for many people, particularly if there’s an imbalance in the wealth of the two people getting married, and applies to cryptocurrency like any other assets.

The simplest thing to do is arrange for a pre-nuptial agreement to be drawn up to detail what happens to your assets if you get divorced.

No special provision needs to be made because the asset is digital. If it is included in the agreement then it will be recognised by the courts and divided up according to the Matrimonial Causes Act.

Is there anything I can legally do to hide my cryptoassets during a divorce?

No. Anyone hiding any assets from the court faces the penalties previously listed.

The same rules apply to cryptocurrency as with any other assets. They must be declared on the Form E that you complete during divorce proceedings.

Being honest can often work out far cheaper and less stressful than attempting to hide assets.

If you’re not, you could face a long and arduous investigation which will potentially see all your other assets frozen.

Additionally, if you are caught hiding assets you stand to receive a far less balanced portion of the assets.

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Disclaimer: This article is for informational purposes only and does not constitute financial or investment advice.

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