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Dealing with cryptocurrencies during a divorce

On Behalf of | Mar 19, 2019 | Divorce

Cryptocurrencies like Bitcoin have become extremely popular among investors in Louisiana and around the country because they offer the promise of robust returns and operate outside the sphere of government regulators. However, the qualities that make them an attractive addition to investment portfolios can be a major challenge to divorcing spouses and the attorneys representing them. Placing a value on these volatile assets can be difficult during property division negotiations, and the privacy offered by Bitcoin and its competitors have made these alternative currencies a popular way for high-net-worth individuals to conceal funds.

The value of marital assets are generally set based on what they were worth when divorce papers were initially filed, but legal and financial advisers say that a different approach should be taken with cryptocurrencies because their value fluctuates so much. Between November 2016 and February 2017, Bitcoin prices surged by more than 1,200 percent and then fell by 40 percent. To address this problem, experts suggest waiting until assets are distributed to set the value of cryptocurrencies.

Tracing cryptocurrency assets is also challenging. When assets like Bitcoins are purchased using online exchanges, they may be revealed by studying financial records and bank statements. However, they are much more difficult to trace when they are purchased directly. Compounding the problem is that the type of individual who purchases cryptocurrencies in this way is unlikely to leave either a paper or electronic trail.

When the facts suggest that assets could be being concealed in a divorce case, family law attorneys might consult with investment specialists and forensic accountants to scrutinize portfolios and financial records more closely. Attorneys could also remind divorcing clients of the possible consequences of negotiating in bad faith by not revealing all of their assets.