Cryptocurrency: Finding Hidden Crypto

Cryptocurrency (crypto) transactions are fast and decentralized. This may cause issues in finding crypto assets in a divorce and property division case. Woodruff Family Law Group’s divorce lawyers in the Piedmont Triad have the knowledge to help you. Becoming educated on virtual currency in your divorce can be beneficial.

The very nature of a decentralized and virtual currency makes it difficult to track down the identity of crypto owners, despite the transactions being public. This is because the identifying information is contained in a private key that only the owner owns. That does not mean it is impossible to identify the parties to a transaction. But some cryptos, such as Monero, are made with anonymity in mind. There are various methods to try and locate hidden cryptos, and any one or combination can result in uncovering a treasure trove of assets.

By far the most straightforward way to obtain a list of crypto assets is to just ask the other party for it in discovery. Our Greensboro divorce attorneys with expertise in cryptocurrency can develop an interrogatory that asks for a list of all owned cryptos, when they were acquired, what was used to acquire them, date of separation value, current value, and where they are stored will work if your spouse is forthcoming. A good follow up question is to ask for a production of the account statements that coincide with these cryptos and transactions.

The following methods assume that the basic discovery has failed, and that the other party is actively trying to conceal.

To get involved in crypto, you must first acquire crypto. Most people looking to invest in crypto, or use them for transactions, will likely be purchasing them on an exchange. This means that they will have to use fiat currency to exchange for virtual.

Discovery questions and requests for production should be aimed at acquiring all bank statements that would encompass the period in which a spouse could have used an exchange. Those transactions will show up on the statements, typically naming the exchange used.

For example, we have seen statements with COINBASE Inc. transfers, with dates and amounts. This at the very least indicates the existence of a Coinbase exchange account. There are sometimes even more secretive ways to buy crypto, including cash. But careful accounting of withdrawals and deposits can uncover these discrepancies and at least allow you and your attorney to dig deeper into the purpose of these withdrawals.

If statements are not full or there is reason to believe you do not have all statements, they can be subpoenaed from the banks as well. Additionally, if your spouse recently acquired new expensive property and you do not see the transaction in your bank accounts, we can check if what they bought could be purchased by crypto. If you believe your spouse may be getting paid by his/her work in crypto, then a subpoena to the company can reveal the compensation amount and dates.

If your spouse does not use an exchange, then they may be mining for coins. Mining in any productive amount these days requires quite a bit of hardware and electricity. Telltale signs of mining activity can be seen by excessive electricity bills, and/or purchasing or acquisition of computer and computer parts. Likewise, “cold storage” of cryptos on hardware or paper can be uncovered by searching secure locations in a home, like a safe or a locked filing cabinet.

Your attorney can subpoena the exchange or wallet that your spouse uses. Many of the major exchanges, such as Coinbase, Gemini, and Kraken, operate in the US and will comply with US law. For example, Coinbase has a webpage that helps you find where to serve subpoenas.

A recent Federal Court case has already held that there is no inherent privacy interest in public blockchain cryptos such as Bitcoin (more on this later). Therefore, if your spouse uses one of these major exchanges (which is likely because trusted exchanges are always highly recommended in crypto circles), then subpoenaing their account details and statements is possible.

Crypto and property division is still a somewhat new development. Our divorce lawyers in the Piedmont Triad are already aware that spouses may be concealing assets through the use of virtual currency. As this area of law develops, we can begin seeing more straightforward ways to obtain records of crypto transactions.