Can You Hide Cryptocurrency in a Divorce?
Can You Hide Crypto in Divorce? Yes but it will require a spouse to omit this asset from a financial disclosure. Many financial disclosures in divorce must be answered under oath, subject to the criminal penalty of perjury.
Can Cryptocurrency Be Used to Hide Assets During Divorce? Do you have to disclose crypto in a divorce?
Can you hide cryptocurrency in a divorce?
Short answer, yes. These types of assets can easily be hidden, but they can also be found if you know what you’re looking for. The reason that they can be hidden is because of our lack of understanding of the blockchain, as well as the velocity and the veracity of the different types of coins and other digital assets that are out there. But remember, it all starts with some sort of payment method at this point in time. So it can be hidden, but it also can be identified if you know some key things to look for.
Can you give us a short list of those key things to look for?
Sure. The first things that you want to look for, I think, are behavioral issues. So most people that are getting involved in crypto right now, they understand that it is a volatile asset, right? So they’re probably doing a lot of research and they’re talking a lot about that asset. You may not notice it at the time. But one indicator, and I want to make a point, it’s just an indicator, could be them talking or learning or reading about it. Another indicator could be hard key wallets. You might see digital devices that look like thumb drives. So if you’re starting to see these types of things, I would say you want to look at it. But then most importantly, if you do have a suspicion of crypto, I think there’s really two places to start. Number one, “Is the individual that you have concerns about employed or have they received payment from somebody for services or product where crypto could be used?”
There’s a lot of companies, specifically in the technology space and other startups, that are using these types of digital assets as compensation and the allure that it gives to some participants in it. The other way to look at that is just the old fashioned looking through bank statements, and what you’re looking for is the individual’s purchasing. Again, I think when you start looking at any kind of asset, whether it’s a misappropriation scheme or whether it’s a conversion scheme, which is what we’re talking about here, there’s some key things you’re going to think about. First of all, do you think somebody would be so willing to hide it that they would disguise the payments? Most of the time when we’re looking for conversions, we’re looking for round dollar numbers. we’re looking for multiple types of events. So there’s tools available to forensic accountants where we know certain types of indicators to look for in that data to determine whether or not that risk is prevalent.
Quick follow up question. In your experience, do you see the transfers from bank accounts or investment accounts, say with a brokerage firm? And if so, are they wire transfers or just some other type of debit and credit?
I’ve seen them all. And that’s a really good question. And you must be looking at that as well. If you see a $5,000 round dollar transaction, the first thing that you want to do, after you see the number, is look to the left of the statement. See if you can identify who the payee was, what kind of transaction it was, because it could be some sort of an ACH transfer or a wire. Well, there’s information in that data right there to start looking. Are there other wired transactions? What about this routing number? Can we find these types of things? Again, it all comes down to materiality and how deep you want to go, but I’ve seen those. The financial institution industry is going through the Fintech revolution. A lot of people talk about crypto, and they talk about digital assets and NFTs.
I would look into the Fintech industry if I was anyone that really wanted to know about digital assets. Look at the types of payment method out there. The allure of crypto is the blockchain and the anonymity and the auditability of that. Well, there’s a lot of different financial products and technology that help with payment, that help with debt relief, that can move funds between assets and liabilities. And I think you need to understand how Fintech is involved.
“Cryptocurrency in Divorce” is a video series with Joshua Shilts CPA/ABV/CFF/CGMA, ASA, CFE answering important questions from divorce attorney Miles Mason, Sr. Miles attended two of Joshua’s lectures with the AICPA’s Forensic and Valuation Services annual national conference and the Tennessee Society of CPA’s annual forensic conference. “Joshua is a dynamic and exceptional speaker. We had to get Joshua on our YouTube channel!” We are fortunate he agreed to educate us on this emerging topic in family law and hope to have him back soon. View his videos:
Tracing Cryptocurrency & Finding the Crypto Wallet in Divorce
Who Gets Cryptocurrency in a Divorce?
Divorce & Cryptocurrency War Story
Three Best Cryptocurrency Tips for Divorce Lawyers
Meet Josh Shilts, the Forensic and Business Valuation Expert
Joshua Shilts CPA/ABV/CFF/CGMA, ASA, CFE
President of Shilts CPA, PLLC, Mr. Shilts’ practice is located in Jacksonville, Florida, but testifies nationally. He is focused on assisting attorneys, individuals and businesses with complex financial matters and disputes. Mr. Shilts has held roles with international consulting and public accounting firms in Miami and New York City as well as positions with large public organizations. Mr. Shilts is a frequent lecturer on a variety of forensic accounting matters. He has been involved with hundreds of forensic investigations dealing with a variety of matters involving personal and business disputes as well as the identification and mitigation of fraudulent activities. Clients have sought Mr. Shilts’ advice and services because of his unique industry experience and knowledge.
Mr. Shilts has provided expert testimony in commercial and family matters surrounding business valuation, economic damages, fraud and other applicable disciplines surrounding economic and accounting issues. He has been qualified as an expert and testified in State and Federal courts.
To learn more about Mr. Shilts and his firm, please view: Shilts CPA, PLLC.
For more discussion, see Property Division in Tennessee Divorce and view our video Is Tennessee a 50 50 divorce state?
