Some divorcing spouses are reportedly trying to hide cryptocurrency assets from the other party during divorce settlements.
But experts are getting better at uncovering these “secret stashes”.
How hidden crypto can be uncovered
In divorce settlements, the law requires that marital assets get fairly divided between the parties. Both separating spouses are obliged to give full and frank disclosure of their finances.
It’s always been the case that some spouses will try to hide assets, such as in offshore accounts, or bank accounts in someone else’s name. But in more recent years, this has extended to cryptocurrency assets, which are not always easy to track down.
But it certainly seems that forensic experts are getting pretty good at it. The methods used to track hidden crypto include examining tax returns, loan applications, bank statements, and/or computer data—such as crypto exchange confirmation emails, or evidence of exchange logins.
They may also look at some of the red flags that indicate a party may be hiding assets, such as:
- Living a lavish lifestyle that doesn’t match the person’s declared income.
- Making large purchases such as an expensive car.
- Unexplained large withdrawals and missing money from joint bank accounts.
- Evidence of crypto transfer activities on bank account statements.
“Money always leaves some trace”
Kayte Lewis, the Managing Director of Voice Lawyers in Sydney, says that separating spouses are obliged to provide at least three years’ worth of bank statements and tax returns during settlements, as well as other documents.
“In cases where a party does not give full disclosure of their financial situation, or there is evidence they are being dishonest, the court may declare an ‘adverse finding’ which could go against them in the settlement,” she says.
Kayte also says “money always leaves some trace” and that forensic accountants are very skilled at tracking it down.
The Federal Court in Australia also has very strong powers to make orders regarding financial tracking in settlements. This may include issuing subpoenas to banks if it appears one party is trying to hide a bank account, Kayte says.
The cost of tracing hidden crypto
The other side of the coin is that looking for hidden crypto during a settlement can be time-consuming and costly. The spouse trying to determine the value of the other party’s assets needs to weigh up whether it’s worth the time, cost or even the effort to pursue it.
However, it certainly seems that it may also not be worth the effort of trying to hide assets from the court, because it could go against you in the end!