Is my spouse hiding money in cryptocurrency?

| May 1, 2020 | Firm News |

The anonymous and unregulated disposition of cryptocurrency makes it an attractive asset-hiding strategy if your spouse wishes to conceal money while dividing marital property during your divorce.

Investigating and tracking digital currency transactions faces new and unimagined hurdles. Yet, it is possible to uncover the existence of your partner’s cryptocurrency assets, so you can be confident that all of your shared property is on the table.

Havens for dishonest financial transactions

According to the New York State Society of Certified Public Accountants, cryptocurrency exchanges use ultra-secure technology called “blockchain” to buy and sell virtual currency. A blockchain encrypts, uniquely distinguishes and distributes every transaction across a public network of computers.

Each cryptocurrency owner is only identifiable by a private alpha-numeric key that contains no personal information. This anonymity makes transactions very difficult to track. Many digital currency exchanges also operate outside of the U.S., which can limit legal recourses like subpoenas. Thus, cryptocurrency is often ideal for illegal or secretive activity.

Furthermore, there is a steep technological learning curve involved with owning digital currency. If you are not tech-savvy, it could be possible for your spouse to be very active in the cryptocurrency market without your knowledge.

Forensic tools for finding cryptocurrency

If you suspect that your partner is hiding assets from you through cryptocurrency exchanges, forensic accounting might help you uncover evidence. Basic financial reports like credit card statements and bank records often reveal online cryptocurrency purchases. Tax returns may also reveal digital currency transactions reported on the schedule of capital gains and losses.

Additionally, a forensic computer audit of your partner’s electronic devices may reveal evidence that points to illicit activity. While a thorough and technologically able spouse may hide much of the evidence of cryptocurrency activity, it is nearly impossible to eliminate all of the traces.