Cryptocurrency: The Cloak of Invisibility for Deceptive Spouses Going through a Divorce - Charlotte NC Family Law & Divorce Blog | Hatcher Law Group


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Cryptocurrency: The Cloak of Invisibility for Deceptive Spouses Going through a Divorce

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Cryptocurrency: The Cloak of Invisibility for Deceptive Spouses Going through a Divorce

Cryptocurrency has been in the headlines for a while now and most people still aren’t sure what it really is or what impact it has on our economy. Not only is cryptocurrency changing the way people around the world invest their money, but cryptocurrency is also changing the way husbands and wives are hiding money.

 

 

What is Cryptocurrency?

The word crypto means “secret” or “hidden.” According to Oxford Dictionary, cryptocurrency is a digital currency that uses encryption methods to regulate the generation of units of currency and verify the transfer of funds. Cryptocurrency is not part of a central bank. Essentially, cryptocurrency works as a channel to exchange money. Bitcoin is the most popular cryptocurrency and probably the first name you thought of when you started reading this article. Bitcoin was invented as a peer-to-peer electronic cash system that does not include a financial institution. Transactions are recorded on the “block chain”, which is a digital journal. Basically, the “block chain” is an accounting book that lists all transactions dealing with cryptocurrency. Bitcoin is not the only cryptocurrency out there; other currencies are available, such as: Litecoin, Dash, Gridcoin, Ethereum, Ripple, and NEM. These are just a few of the most popular cryptocurrencies available.

 

The Cloak of Invisibility

Cryptocurrencies are virtual and anonymous, and this anonymity is what attracts many people to it. The names of buyers and sellers are anonymous and they cannot be easily tracked. Additionally, cryptocurrency is not yet regulated by the FDIC and there is no principal authority that regulates the exchanges between peers. Thus, cryptocurrency is seen to some as an attractive way to hide assets. Since cryptocurrency, like Bitcoin, is based on anonymity, individuals may have the misguided assumption that cryptocurrency can be used as a form of asset protection. However, asset protection requires planning and strategy. Individuals who use cryptocurrency to conceal their assets can be subject to legal charges, such as fraud.

 

Cryptocurrency and Divorce

In North Carolina, the parties determine how to divide their marital property in an equitable distribution proceeding. Equitable distribution is the process of identifying, valuing, and distributing martial and divisible property. A North Carolina court will require the parties to complete an inventory, which lists all of their marital and separate property. In addition, parties may engage in the discovery process. In the course of discovery, a party can request the other party to produce documents and disclose evidence, by way of depositions, interrogatories, requests for production of documents, subpoenas, and requests for admissions. If one party is suspicious that the other party may be hiding assets, there are several techniques attorneys can utilize to expose money that may have been transferred to cryptocurrency. Here are a few examples of the documents and resources attorneys can use to uncover discrepancies:

  • Old bank account statements may shed light on any transfers, canceled checks, or withdrawals that occurred and may look suspicious
  • Old tax return statements may show assets the other spouse is holding and can expose hidden monies that a party may not have otherwise known about
  • Credit reports may expose irregularities and suspicious financial activity
  • Private investigators or computer forensic investigation firms can investigate for proof of any activity on cryptocurrency sites

 

As stated above, the anonymity of Bitcoin and the like is what attracts most people to using cryptocurrency. Nevertheless, the deceptive spouse who is using cryptocurrency as a tool to hide assets should be aware that it will most likely be a short-lived concealment that could result in major legal consequences. At some point in the process of discovery, if it is apparent that the other party has attempted to or has “willfully obstructed or unreasonably delayed” discovery proceedings in an equitable distribution matter, which “is or would be prejudicial to the interest if the opposing party”, the court shall impose sanctions on that party for their actions (N.C.G.S. §50-21). Thus, it is imperative that all parties involved are truthful and not evasive.


 

At Hatcher Law Group, we are dedicated to providing you with exceptional legal services. Our attorneys work diligently to simplify the complexities of each case, alleviating unnecessary stress and ensuring each client’s experience is as seamless as possible. Schedule a consultation with one of our family law attorneys today.

 

SOURCES

A Bit-ter Divorce: Using Bitcoin to Hide Marital Assets Your Guide to Buying Bitcoin Hiding and Finding Marital Assets in Bitcoin The End of the ‘Alimony’ Deduction Under the ‘Tax Cuts and Jobs Act of 2017

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