Identifying hidden assets in cryptocurrency during property settlements presents unique challenges that require specialised expertise. As digital currency assets like cryptocurrencies become more prevalent, they are increasingly used to conceal wealth during divorce and property separation proceedings. In Australia, the Family Law Act 1975 (Cth) mandates the just and equitable distribution of marital assets, but cryptocurrencies can be difficult to trace due to their decentralised nature and the ease with which they can be hidden.

Cryptocurrencies are digital currencies secured by cryptography, often operating on decentralised blockchain networks. They are not issued by governments, making them immune to governmental control. In Australia, cryptocurrencies are considered property and are subject to Capital Gains Tax. The volatile nature of cryptocurrencies, with values fluctuating significantly, adds complexity to their valuation in property settlements.

Forensic tracing is often necessary to uncover hidden cryptocurrency assets. This involves analysing bank statements for transactions linked to cryptocurrency purchases. However, if the cryptocurrency was acquired through third-party or deep net accounts and stored in hard wallets, detection becomes more challenging and costly. Evidence such as transaction records, email confirmations, and digital wallet identifiers can be crucial in court proceedings.

Effectively tracing and valuing cryptocurrency assets

Family law practitioners can effectively trace cryptocurrency assets by employing several strategies:

• Full and Frank Disclosure

Both parties to the relationship are required to disclose their true financial circumstances, including cryptocurrencies. Practitioners should ensure compliance with this obligation by opposing parties.

• Bank and Credit Card Statements

Analysing these statements can reveal transactions related to cryptocurrency purchases, providing a trail to follow.

• Forensic Tracing

This involves detailed examination of financial records and digital evidence to uncover hidden cryptocurrency assets, especially when transactions are made through third-party accounts or stored in hard wallets.

• Digital Wallet and Exchange Records

Screenshots and transaction ledgers from digital wallets and exchanges can provide evidence of cryptocurrency holdings.

• Legal Orders and Forensic Experts

Courts can issue orders to compel disclosure, and forensic experts can assist in tracing complex transactions.

These methods, combined with the practitioner’s legal expertise, can help parties navigate the complexities of cryptocurrency in family law.

Are there legal implications of hiding cryptocurrency in Family Law matters?

Hiding cryptocurrency assets during a property settlement in Australia can have significant legal implications. Under the Family Law Act 1975 (Cth), both parties are required to provide full and frank disclosure of all assets, including cryptocurrencies. Failure to disclose these assets can result in serious consequences, such as the court disregarding any claimed valuations and treating the assets at their original purchase value, as seen in cases like Powell & Christensen [2020] FamCA 944.

The Court may also make orders that the other party receives a greater share of the net overall assets.

Cryptocurrencies pose unique challenges due to their pseudonymous nature and the difficulty in tracing them. Unlike traditional assets, cryptocurrencies are not easily subpoenaed, and their records are often stored digitally. This makes it easier for individuals to hide these assets, but doing so can result in legal penalties and an unfair division of the marital asset pool.

Courts may require legal orders and forensic experts to trace hidden cryptocurrency assets, and non-disclosure can lead to unfavourable outcomes in property settlements. Therefore, it is crucial for parties in a property settlement to comply with disclosure obligations to avoid potential legal repercussions.

In summary, hiding cryptocurrency assets during a family law matter can lead to several significant legal consequences, including but not limited to: –

• Legal Repercussions

Failing to disclose cryptocurrency assets can result in contempt of court charges. Courts may impose penalties, such as awarding the hidden assets to the other spouse or dismissing the claims of the non-compliant party.

• Financial Penalties

The Court may order the offending party to pay fines and cover the legal fees incurred by the other spouse in uncovering the hidden assets.

• Damaged Reputation

Discovering hidden assets can damage the offending spouse’s credibility in court, potentially influencing the judge’s decisions unfavourably towards them.

• Asset Valuation Issues

Cryptocurrency’s volatile nature can complicate asset division, as its value may fluctuate significantly during the divorce process.

Overall, hiding cryptocurrency can severely impact the fairness and outcome of divorce proceedings and there can be significant legal and financial penalties imposed for hiding cryptocurrencies from your ex in property proceedings.

Legal professionals specialising in family law must maintain their professional expertise about current developments in cryptocurrency technology to effectively identify and value these assets. Such expertise is essential in ensuring a fair division of assets, as they can navigate the complexities of disclosure obligations and the potential for asset concealment.

If you suspect your ex may be hiding digital assets from you, contact us to arrange an initial consultation.

Contact us

If you have questions in relation to Family Law matters, contact us to book an initial consultation with one of our experienced family lawyers, and we will provide you with tailored advice with respect to your unique circumstances. call 1800 957 936, email mail@rmolaw.com.au or submit an enquiry on our website.

We are available to meet with you at any of our local offices (Brisbane, Gold Coast, Beenleigh, Cleveland and Jimboomba) or by telephone or video-conference.

This article is for your information and interest only. It is not intended to be comprehensive, and it does not constitute and must not be relied on as legal advice. You must seek specific advice tailored to your circumstances.

Elle Marshall

Associate