Divorcing couples have started battling over their share of cryptocurrency assets that have soared in value, lawyers have revealed.
After adventurous investors jumped on the bitcoin bandwagon in recent years, and bought into other digital currencies like ethereum and ripple, spouses are trying to claim their share of assets that appreciated exponentially in 2017 (and suffered a correction in 2018).
In one case, an investor bought £80,000 of cryptocurrency in November 2016, which was worth £1million in December 2017 and is now worth around £600,000 – and his wife wants a slice of the investment.
Hidden assets: Divorcing couples have started battling over cryptocurrency gains
Another case involves a £200 initial investment by a husband, which could now be worth ten times more, leaving his wife keen to get her share.
In a third case, a husband is refusing to disclose details of his crytocurrency assets. A fourth case is also said to be developing quickly. All are based in Oxfordshire and London and began between six to 18 months ago.
Vanadana Chitroda, a partner at solicitor firm Royds Withy King in London, which is the firm dealing with the cases, said: ‘Cryptocurrencies have been with us since 2009 when Bitcoin was launched but have only recently become an issue for separating couples as awareness, values and media interest have soared.
‘These are the first cases we have seen, and we expect to see many more. There will also be those divorces where a spouse may not have disclosed such assets leaving a traceability nightmare.’
As anyone who has been following the ups and downs of the cryptocurrency markets will know, they are also highly volatile. In divorce proceedings, this makes it difficult to pin down their exact valuation.
Volatile: Cryptocurrency markets can be highly volatile making valuations tricky
Battles: In one case, a husband has a £600,000 investment a wife wants to get a slice of
Ms Chitroda said: ‘Valuations will have to be carried out a number of times during the divorce process as the case progresses.’
She added: ‘Whilst cryptocurrencies are volatile, they are not going to go away.
‘It is important if you believe your husband or wife has invested in or purchased cryptocurrnecies, such as Bitcoin, and you are separating, you tell your legal adviser.’
Having risen the dizzy heights of around $20,000 in December, Bitcoin is now hovering at just over the $8,700 mark.
Mark Phillips, a partner in the Family team leading Royds Withy King’s divorce cases in Oxford, said: ‘Cryptocurrencies have seen some individuals accumulate considerable wealth from a small investment, and the nature of these currencies make it very easy for one party to hide assets.
‘Unless a spouse discloses an investment in cryptocurrencies, it is entirely possible for them to remain hidden.
Get a pre-nup: in future it could become commonplace to include arrangements for cryptocurrencies in pre-nuptial agreements
‘Parties have a duty to provide full and frank disclosure of their assets during a divorce and if there is no disclosure or evidence of the existence of cryptocurrencies, it will be extremely difficult for a party to receive their fair share of the matrimonial assets.
‘Tracing cryptocurrencies could be enormously time-consuming and expensive. This is, of course, much easier if cryptocurrencies are traded via an online investment platform and bought with funds from a bank account, as the original value of the transaction can then be established. When cryptocurrency is purchased directly and moved offline, it becomes almost impossible to trace.’
Unlike other investments like shares or bonds, many divorce lawyers are also likely to have little experience dealing with spouses trying to conceal digital currency stashes. It pays to do your research and make sure you use a law firm which keeps abreast of such shifts.
Research by Coinlist suggests young people aged between 18 and 24 are four times more likely to invest in cryptocurrencies than their parents, suggesting as lawyer Mark Phillips told This is Money, it is a ‘young person’s game.’
In light of this, in future it could become commonplace to include arrangements for cryptocurrencies in pre-nuptial agreements. Who said romance was dead?
Fluctuations: Having risen the dizzy heights of around $20,000 in December, Bitcoin is now hovering at just over the $8,700 mark
DIVORCE AND CRYPTOCURRENCY
Vandana Chitroda for This is Money.
What can someone do if they are embroiled in divorce proceedings and think their spouse is hiding cryptocurrency assets?
It is imperative to take specialist legal advice straight away so that steps can be taken to seek orders from the court as to disclosure of the cryptocurrency.
If disclosure is not forthcoming and the tracing exercise through bank statements (if disclosed) does not show the purchase transaction, a digital forensics expert can be appointed who will trawl through the spouse’s computers and devices in an attempt to find the purchase transaction and wallet where the cryptocurrency is held.
Freezing injunctions can be obtained on all assets if there is a concern about the cryptocurrency being hidden and/or disposed of.
Administering a freezing injunction on cryptocurrency however is impossible because of the element of decentralisation.
After a divorce, can a former spouse still start court proceedings to try and dig out cryptocurrency assets from their ex-spouse?
This can only happen in limited circumstances where a final order in full and final satisfaction of a person’s claims has already been dismissed for example, where the cryptocurrency had been hidden but then evidence of it’s existence came to light later on.
If no final financial order had been made but decree absolute which is the final divorce certificate had been granted, then it is possible to make financial claims later on.