Financial infidelity has reached new levels since the advent of cryptocurrency. Increasingly, people looking to shield assets from their former spouses during divorce are often resorting to cryptocurrency.
It takes a savvy divorce attorney with access to top-tier forensic accountants to discover hidden assets so they can be appropriately divided when a divorce agreement is reached.
A New York housewife recently found her estranged husband’s secret crypto wallet, complete with half a million dollars worth of Bitcoin.
The story began with the end of a 10-year marriage. Halfway through the lengthy divorce proceedings, the wife, identified by CNBC with the pseudonym Sarita, got suspicious. Something didn’t add up: her husband, who made millions of dollars every year, hadn’t disclosed many assets. With the help of a forensic accountant, Sarita was able to track down 12 Bitcoins, worth $500,000 at the time, in a secret cryptocurrency wallet.
The New York housewife, who didn’t feel safe sharing her real name, told reporters, "I know of Bitcoin and things like that. I just didn't know much about it. It was never even a thought in my mind, because it's not like we were discussing it or making investments together. . . It was definitely a shock."
Sarita’s problem is bound to affect more and more Americans as cryptocurrency continues to gain popularity. According to an NBC poll, one in five Americans and half of male adults under 50 have “dabbled in crypto.”
How People Use Crypto to Hide Marital Assets
The New York woman is one of many divorcing Americans hunting down their former spouses’ virtual coins. Without banks and other centralized institutions as intermediaries, crypto provides an ideal opportunity to conceal marital assets during divorce.
Now that even Swiss banks are forced to disclose information about American account holders, crypto has become the new Switzerland. It can be hard to hide real estate, cash, or investment accounts, but turn your cash into digital assets like Bitcoin, which has all but disappeared. And while all Bitcoin transactions are traceable and recorded on the blockchain, these records are not linked to the buyer’s identity.
Divorce attorneys and forensic accountants have had to develop new tools to analyze crypto transactions to trace hidden assets. Certain digital assets are especially difficult to find, as they have been marketed as completely anonymous and are often used by people in shady businesses. Monero, Zcash, and Bytecoin are good examples of this.
Cryptocurrency stored in cold wallets is also ideal for concealing assets as it is not accessible online. A cold wallet is a device similar to a thumb drive, storing passkeys. Anyone with the passkeys can access and use the crypto. Some people also keep passkeys written out on paper and securely stored. In these cases, if the paper with the passkeys is lost, no one can access the crypto anymore.
When a spouse uses crypto trading platforms to convert cash into digital currency, experienced forensic accountants can trace usernames and transactions to locate hidden assets. In New York, seasoned divorce attorneys are constantly working with cryptocurrency specialists and finding new ways to trace hidden crypto in divorce cases.
The Many Forms of Financial Infidelity
Financial infidelity doesn’t always involve cryptocurrency. A Bankrate survey indicated that 12% of people who are married or living with a romantic partner have a secret credit card, 9% have hidden savings, and 10% have hidden debt. When relationships end, it is up to forensic accountants to discover these assets before the courts decide how the marital pot will be divided.
The Bankrate study also showed that well over half of Gen Z and Millennials hide financial details from their romantic partners. In this scenario, relying on experienced divorce attorneys and forensic specialists has become more important than ever to ensure all marital assets are being disclosed.
Finding Hidden Crypto Assets During Divorce in New York
Our New York high-net-worth divorce attorneys have been dealing with spouses trying to conceal assets. Our team works through complex divorce settlements and asset division agreements in the five boroughs of Manhattan and across the State of New York. Contact us today at 212.682.6222 or online.