The use of cryptocurrency to hide assets

On Behalf of | Aug 16, 2017 | White Collar Crimes

While divorce creates personal and financial uncertainty, one certainty is that some soon-to-be ex-spouses will refuse to play by the rules. Highly contentious divorces with significant assets sometimes lead to one spouse failing to disclose money and property and hiding what would otherwise be subject to asset distribution.

From concealing large stacks of cash to a complex web of financial transfers, the practice of hiding assets has become more sophisticated and harder to track.

Just as the internet and email changed communications, Bitcoin has altered the way people conduct their financial transactions. Users are assigned a wallet address where Bitcoins are stored. Described as a “peer-to-peer electronic cash system,” the currency allows users to transfer funds to one another without a Western Union, a bank or governmental authority.

The use of Bitcoin to hide marital assets is anything but a foolproof strategy. Successfully tracking activity ranges from reviewing hard copies of emails to analyzing hard drives to identify the so-called anonymous users’ actual identities. Even without that evidence, a skilled attorney with access to experts can identify unauthorized withdrawals that depleted marital assets.

Forensic analysts that specialize in Bitcoin and other forms of “cryptocurrencies” can be a valuable resource. These professionals can spot red flags that raise suspicion over a spouse hiding assets, including:

  • Large amounts of money used to purchase Bitcoins being transferred to a Bitcoin exchange
  • Large cash withdrawals that are transferred to purchase Bitcoin from peer-to-peer point of sales
  • The use of Bitcoin mixers that increase the difficulty of following the money trail

While people are not at their best during divorce, unethically shielding assets from equitable distribution will only make the process even more complicated and lengthy.