How New York Handles Crypto Assets in Divorce

As Bitcoin’s popularity increases daily, more and more New Yorkers are having to seek out and split up crypto assets in divorce – tasks that become problematic without the right approach.

By 2030, analysts estimate the cryptocurrency business market value will exceed $3.1 trillion. Today, around one in 20 American’s own virtual currency. Bitcoin not only offers ease of use and value potential, but an appealing opportunity to conceal assets.

Crypto transactions lack identifying information. They are safe, anonymous, and irreversible. Since there is no third party carrying out transactions, she usual divorce subpoenas don’t always do the trick. Forensic work becomes much more relevant.

Privacy coins like Dash, Zcash, and Monero make asset hiding even easier - offering untraceable transaction details. On its website, Monero advertises secure, private, and untraceable features including:

  • Transactions confirmed by distributed consensus, then immutably recorded on blockchain.
  • Ring signatures, ring confidential transactions, and stealth addresses obfuscate origins, amounts, and destinations of all transactions.
  • Sending and receiving addresses as well as transacted amounts are obfuscated by default.
  • Transactions cannot be linked to a particular user or real-world identity.

Divorcing spouses can lose millions of dollars in marital assets due to a partner hiding money as digital currency. Other times, parties may be forced to split up their own crypto assets in divorce because they didn’t know how to prove it was acquired before marriage.

Difficulties tracing virtual currency and the relative newness of laws surrounding it make knowing how to handle digital money in divorce vital to protecting what is rightfully yours.

How Does Cryptocurrency Work? 

As the name indicates, “cryptocurrency” is a form of currency generated by data encryption – or “cryptography.” Instead of a bank or country setting its value, the value is determined by supply, demand, use (active wallets on the network), and security. As long as the data encryption used is safe, the digital currency is safe.

Cryptocurrency gets rid of the middleman required for traditional financial transactions. Instead, blockchain technology handles the transactions – allowing information to be distributed, but never copied. In the blockchain, each “block” is a transaction. There is no central database. Information is simply updated on multiple locations in real-time.

When you buy cryptocurrency from a cryptocurrency exchange, you get a “key.” This key is a password to your “digital wallet,” a specific address (akin to an account number) on the blockchain where your digital currency is stored. This key serves as your record of ownership.

Your money can then just sit in your digital wallet as an investment, or you can transfer it to others or buy goods or services from places that accept virtual currency.

Similar to a credit card, everything is done electronically. But cryptocurrency functions more like paper money. There are little to no transaction fees, and no identifying information like names or addresses associated with transactions.

Whoever has the key controls the funds in the digital wallet. If you lose the key, you lose access to the money. Most people will print out their key, save it in the cloud, store it in a digital wallet app, use cryptocurrency software, or keep it on an external hardware wallet.

Speaking of Monero and losing keys, Monero creator Riccardo Spagni, better known as “fluffypony, offers a prime example of how easy it is to hide crypto assets. Back in 2017, Spagni tweeted that he had “lost [his] private keys in a horrible boating accident.”

Cryptocoin Spy journalist Alistair Johnston pointed out how Spagni likes to mention that he lost all his crypto “particularly to any tax officials who might be listening in.” Of the alleged accident, Spagni said in an interview, “serves me right for firstly just using paper wallets, only having one copy, and taking them with me when I went on a boat called the Titanic 2.”

Later photographed wearing an $800,000 watch and changing his story from one boating accident to several, Spagni’s lost key claims spurred controversy on social media. Whether he’s lying or not, his case shows how easy it is for a spouse to avoid division of crypto assets during divorce by claiming they lost their keys.

Bitcoin and Other Types of Cryptocurrencies

When most people think of cryptocurrency, they think of Bitcoin. The mysterious creator(s) of Bitcoin, going by the pseudonym Satoshi Nakamoto, first described Bitcoin in a 2008 whitepaper titled Bitcoin: A Peer-to-Peer Electronic Cash System, in which Nakamoto wrote:

“What is needed is an electronic payment system based on cryptographic proof instead of trust, allowing any two willing parties to transact directly with each other without the need for a trusted third party.”

Made available for public use in 2009, Bitcoin was the first official digital currency. You can buy Bitcoin with a credit card on internet exchanges like SpectroCoin or Indacoin. You can also set up your business to accept Bitcoin as a form of currency, exchange cash or other items of value for keys to Bitcoin wallets, or buy and sell Bitcoin on trading exchanges like Kraken, Gemini, or Coinbase.

But Bitcoin is far from the only type of cryptocurrency. In fact, there are hundreds of different altcoins. Given the success of Bitcoin, developers continue to create new forms of digital cash. Investors can exchange Bitcoin or other cryptocurrencies for units of a new cryptocurrency still in development via an “Initial Coin Offering” (ICO).

Other popular cryptocurrencies include:

  • Bitcoin Cash (BCH): Created in 2017, Bitcoin Cash (aka Bcash) is a spinoff of Bitcoin that allows for faster transaction times than the original. Today, one Bcash is worth $335.81.
  • Ethereum (ETH): Launched in 2015, Ethereum’s cryptocurrency offers faster transactions, consistent mining rates, and transaction rates based on complexity (rather than size). Currently, one Ether equals $224.22.
  • Dash (DASH): Previously known as Xcoin and Darkcoin, Dash offers faster transactions and enhanced anonymity. Today, Dash is valued at $106.97.
  • Monero (XMR): Created in 2014, Monero markets itself as an “untraceable” cryptocurrency. Through its obfuscated public ledger, transaction sources, destinations, and amounts are entirely hidden. Monero’s price is at $92.56.
  • Litecoin (LTC): Launched in 2011 and very similar to Bitcoin, Litecoin offers decreased transaction time (2.5 minutes vs. 10 minutes), increased coin max, and a different hashing algorithm (scrypt). Currently valued at $89.93.
  • Zcash (ZEC): Launched in 2016, Zcash offers extra privacy for transactions while providing a "selective disclosure" option for users who need to prove transactions for auditing purposes. Currently, Zcash is priced at $61.93.
  • NEO (NEO): Launched as Antshares in 2014, NEO is a Chinese cryptocurrency that offers digital identities to comply with KYC/AML regulatory requirements and tools to help developers create smart contract applications on the blockchain. Today, NEO is priced at $11.46.
  • EOS (EOS): Released in 2018, EOS cryptocurrency aims to solve scalability issues found with Ethereum and Bitcoin and Ethereum and eliminate user fees. Currently, EOS is priced at $4.20.
  • Ripple (XRP): Launched in 2013, Ripple offers a low-cost crypto solution for international payments. Unlike most cryptocurrencies, it works with traditional financial institutions. Currently, XRP is at $0.31.
  • IOTA (MIOTA): Short for the Internet of Things Application, IOTA moved away from blockchain technology and conducts fast, free transactions via IoT devices and machine-to-machine (M2M) communications. Currently valued at $0.28.
  • NEM (XEM): NEM cryptocurrency offers several unique features. Users can own “Namespaces” (domain names on the blockchain), and participate in multi-signature contracts built into the blockchain allowing more than one user to control account activity. Today’s NEM crypto price is $0.06.
  • Cardano (ADA): Launched in 2017 by Ethereum co-founder Charles Hoskinson, Cardano boasts higher speed, lower transaction costs, better security, and advanced adaptability. Currently, one ADA is priced at $0.05 USD.

How to Find Hidden Crypto Assets in Divorce 

In New York divorce, cryptocurrencies are handled just like any other asset. If crypto assets are present and shown to be marital property, each party will get their fair share in the divorce settlement. The problem is knowing whether any crypto assets exist.

At our Manhattan divorce firm, we see both sides of the fence – from spouses who suspect the other is hiding virtual cash to parties claiming their cryptocurrency is not part of the marital property. 

Proving either case can require the participation of expert forensic accountants who have a deep understanding of cryptocurrency assets, virtual wallets, and transaction dynamics. There is a big difference between losing your key or getting locked out of your “account” and trying to conceal assets. The court needs to understand this, and it takes a forensic crypto expert to establish what really happened.

Hiding digital currency during divorce is as illegal as hiding bank accounts. Though much of the appeal of crypto is the purported “untraceable” transactions, there are ways to find concealed crypto assets and ensure each spouse gets their dues after divorce. Finding your spouse’s crypto stash or assessing the value of virtual currencies and ICO shares can be challenging, but it’s not impossible.

Transactions with crypto exchanges like Coinbase, Kraken, Polinex, Bittrex, and Gemini often show up on bank statements. This proves the spouse who controls that bank account has some virtual currency somewhere and can be grounds for requesting cooperation from the exchange to view account records and transaction history.

It is also possible to subpoena exchange records, though it can be more difficult to secure records from exchanged based outside the U.S.

Tax return forms are another source of information that can identify crypto assets. Cryptocurrency transactions must be reported in tax returns as either capital gain or loss. The same is true of Net Worth Statements. 

Since transactions are recorded in the fixed blockchain ledger, you may be able to identify public addresses and find out where your spouse’s crypto has been transferred. You may also be able to find out when a transaction occurred and how much crypto was involved. This tactic won’t be available with privacy coins like Monera or Dash.

New York City forensic accountant Mark DiMichael recommends searching the marital property for printed crypto keys. You can also search your spouse’s electronic devices for software and hardware wallets. But remember, this must happen during the divorce discovery process. Randomly accessing private information without your spouse’s consent could render the evidence unusable in court.

DiMichael also offers a list of signs that your spouse is holding crypto:

  • Spouse very tech-savvy
  • Spouse has owned cryptocurrency in the past
  • Spouse has bought or sold cryptocurrency on an exchange
  • Spouse has received cryptocurrency for goods or services

If your spouse uses cryptocurrency as part of their business, try to recall how your spouse stores and transacts in cryptocurrency. Where do they keep their important records? Do clients have access to those records? What electronic devices does the spouse own? Do clients currently have physical access to your spouse’s computers, phones, or tablets?

Aside from enlisting an experienced divorce attorney with a powerful team of seasoned crypto investigators, it is useful to stay up to date with crypto developments. My team and I keep a close watch on the market using resources like CoinDesk, Coin Telegraph, Bitcoin Magazine, and Reddit.

Is Your Cryptocurrency Marital Property? 

Once the discovery process determines cryptocurrency assets are present, the question becomes, are those assets marital or separate property? If marital, they will factor into the divorce settlement. 

New York is an equitable distribution state, meaning any digital currency acquired or accumulated during the marriage will be split between spouses according to their individual contribution. If the crypto was acquired, inherited, or received as a gift before marriage, it may be considered separate property and not subject to division in divorce.

In other words, it all comes down to when your spouse acquired the digital assets – and this seemingly simple piece of information can be extremely difficult to uncover with untraceable crypto transactions.

Here’s a scenario from our free eBook, Cryptocurrency Assets in Divorce. A single guy, Nick, bought some Bitcoin at $1.20 in 2011 before meeting his wife, Mary. Seven years later, Nick is married and has a son. He’s invested much of his time in learning about digital assets and the market. He liquidates his crypto and is now a Bitcoin millionaire.

Meanwhile, Nick’s wife has been running the house and raising their son. With the new Bitcoin millions, she wants Nick to buy the biggest, most luxurious New York home they can afford. Nick disagrees. He’s more interested in finding an optimal community for raising children. But he caves and purchases his wife’s dream house.

Suddenly, Nick’s wife wants a divorce. Had Nick held onto the Bitcoin he bought before the wedding, it would have been separate property and not subject to split in the divorce settlement. But because Nick liquidated his Bitcoin and purchased a house during the marriage, Mary stands to collect millions.

Say Nick didn’t buy the house. Here, if he could prove that he purchased the Bitcoin before marriage, he could keep it all. But Nick couldn’t trace its origins. He bought much of it via direct messaging members on and mining (rather than exchanges). No records or receipts existed to prove when he bought it. Had he kept records of his transactions, he would have had potential proof of purchase before marriage.

In addition, because cryptocurrency in divorce is relatively new, courts don’t yet fully understand how promising virtual currency projects work. If you get locked out of your crypto account during divorce (a very real possibility), mediators may jump to the conclusion that you’re hiding coins. If a court finds negligence, you could end up paying your ex half of the lost crypto value out of pocket.

Uninformed laypersons often assume if you own crypto, you can access it. Without a crypto-savvy divorce lawyer, you’re out of luck.

If Nick had liquidated his crypto into an LLC or trust, and that company had then used the cryptocurrency as collateral to borrow cash, he might have been able to keep it. It is fine to liquidate your crypto into a joint account, just be aware that the transaction is probably renouncing half of your rights to those funds. 

I cannot stress this enough. Do not go into a New York divorce hearing without a lawyer and a team of experts who know the ins and outs of crypto. Whether you are trying to unearth your wife’s concealed crypto or looking to protect your hard-earned Bitcoin from a greedy estranged husband, you need the experts backing you up.

Cryptocurrency Valuation in New York Divorce 

Cryptocurrencies are bought and sold on exchanges like stocks, and values are notoriously volatile. In 2011, one Bitcoin was worth $1. Its value peaked at $20,000 in December 2017, and it’s still worth over $11,750 today. Even daily price fluctuations are so great that many crypto enthusiasts are akin to day traders.

Bitcoin Price History

If you are splitting digital currency in divorce, the time and method of valuation are going to play a big role in the outcome. Your martial estate could gain or lose thousands of dollars over the course of negotiations and divorce proceedings.

In New York, marital assets are typically valued on the date the divorce is filed. But with assets like crypto cash that fluctuate wildly with the market, the date of distribution or time of settlement might offer better results.

Rather than liquidate, many divorcing couples opt to divide the cryptocurrency itself, one party paying equalization, then selling it later on an exchange. An experienced New York divorce lawyer working with a team of cryptocurrency experts can help maximize the crypto valuation for your specific case.

Crypto Asset Distribution In New York Divorce 

Once crypto assets have been identified and characterized as marital property, they will need to be distributed between parties. Divorcing couples have several options here. Digital coin owners could value the cryptocurrency and offer the other party different assets of equal value. They could also sell the digital coins and split the cash or transfer the crypto on an exchange.

There are pros and cons to each. The assets of equal value tradeoff can be iffy, since crypto value fluctuates widely. If you keep your Bitcoin and he gets the house, then Bitcoin tanks, you end up on the losing end of that deal.

Cashing out (if done at the right time) might be best for parties who aren’t knowledgeable in digital currency and wouldn’t want to deal with the volatility. On the other hand, cashing out could cost a significant amount in fees and capital gains tax.

For parties who know how to trade in crypto (or are willing to learn), transfer might be the better choice. Here, each party would avoid the fees and be able to decide what to do with the crypto asset on their own time.

Again, an experienced New York divorce lawyer with specific knowledge of cryptocurrency assets can ensure you weigh all the options and come up with a solid solution.

Divorcing couples who own crypto assets, either jointly or separately, face a number of unique and challenging obstacles. The legal arena is still playing catch up with the world of cryptocurrency. Our legal system can’t make a spouse respond with cash for extremely volatile crypto, simply because it doesn’t understand how virtual currency behaves.

While New York attorneys, judges, and arbitrators must continue to educate themselves about digital asset technology, crypto-cash concealment, liquidation, and valuation, New York forensic experts must hone their resources to locate digital currencies and time things for max valuations.


Dror Bikel

Dror Bikel co-founded Bikel Rosenthal & Schanfield, New York’s best known firm for high-conflict matrimonial disputes. A New York Superlawyer℠ and twice recognized (2020 and 2021) New York Divorce Trial Lawyer of the Year, Dror’s reputation as a fearsome advocate in difficult custody and divorce disputes has led him to deliver solid outcomes in some of New York’s most complex family law trials. Attorney Bikel is a frequent commentator on high profile divorces for national and international media outlets. His book The 1% Divorce - When Titans Clash was a 5-category Amazon bestseller.

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