- Cryptocurrency is on the rise as a means to hide assets in divorce cases
- Trend is sparking a game of cat and mouse with forensic accountants
- One New York woman discovered husband’s secret Bitcoin wallet worth $500K
Cryptocurrency is becoming increasingly popular as a method of concealing assets during a contentious divorce, sparking an evolving game of cat a mouse with forensic investigators, according to a new report.
In one case, a suspicious New York housewife seeking a divorce tracked down 12 bitcoins, then worth about $500,000, in a secret crypto wallet maintained by her estranged husband, CNBC reported on Saturday.
The woman became suspicious because her husband, who earned some $3 million a year, wasn’t disclosing many assets in the divorce case, prompting her to enlist a forensic accountant.
‘I know of bitcoin and things like that. I just didn’t know much about it,’ said the woman, who asked not to be named out of fear of retaliation.
‘It was never even a thought in my mind, because it’s not like we were discussing it or making investments together. … It was definitely a shock.’
Though hiding assets is nothing new for those seeking to avoid a court judgement, the rise of cryptocurrency has created new headaches for divorce attorneys.
‘I really still think the law is trying to catch up with this novel form of currency, even though it’s been around for quite a while,’ Kim Nutter, a family law attorney in Florida, told CNBC.
As financial tricks involving crypto have evolved, so have the tools of those tasked with tracking down marital assets.
Some forensic accountants now specialize in tracking cryptocurrency, using sophisticated analysis of blockchain transactions to trace hidden assets.
Sneaky spouses have developed new tactics as well, including using anonymized digital currencies such as Monero, which is said to be nearly impossible to trace.
‘Cold storage’ wallets are another favorite trick, in which a cryptocurrency passkey is stored on a physical device like a thumb drive, which is easily portable and cannot be accessed online.
So-called ‘financial infidelity’ is not limited to divorcing couples, however.
A February survey from financial information site Bankrate found that 39 percent of Americans have committed some form of ‘financial infidelity’ against their romantic partner.
Among those who are married, in a civil partnership, or living with their significant other, 12 percent have a secret credit card, Bankrate found.
Meanwhile 11 percent are racking up big expenses their partners do not know about, 10 percent are carrying hidden debt, and 9 percent have a secret savings account.
One interesting note from the study is that younger generations seem to be hoarding the biggest financial secrets.
Among Generation Z, a whopping 63 percent hid money details from their current partners, along with 54 percent of Millennials – both numbers far higher than with Gen X or Baby Boomers.
‘There used to be an expectation that couples would totally link up their financial lives, but I find that is really changing with younger clients,’ Amanda Clayman, a financial therapist in LA, told Reuters following the survey.
‘A lot of younger people don’t necessarily have that level of integration. They may not even see these things as secrets.’