How Bitcoin Affects Divorce Settlements
The divorce process is challenging enough for couples who are splitting up without the added difficulty of dividing sophisticated assets like cryptocurrency. Bitcoin has been breaking headlines in the news since the end of 2017 when each “coin” rose above the $20,000 mark for the first time. It has since dropped considerably in value, but the digital currency is still currently worth several thousands of dollars. The rapid expansion of Bitcoin’s value and popularity has proven how volatile the cryptocurrency market really is, and it has made the process of dividing assets during the divorce proceedings more complicated.
The central premise of Bitcoin and other cryptocurrencies is all about privacy. Bitcoin was one of the first cryptocurrencies to be implemented in 2009, and the courts are struggling to determine the best way to react to its impact. Although the SEC has recently announced plans to force online conversion platforms to register as security exchanges, more time is needed before the legal system can decide the best way to address the effects of this new technology. New Jersey is not a community property state, which means that marital property is divided by the judge in a manner that is considered to be fair, but not necessarily equal. Bitcoin investments may be considered marital property if the digital currency was purchased during the lifetime of the marriage. Currently, there is no existing case law to guide the court’s rulings in regards to cryptocurrencies, and new solutions will need to be applied to ensure justice for all.
Cryptographic Aspects of the Currency
The sad truth is that people often attempt to conceal their assets during a divorce. It’s no secret that people have illegally created fake accounts to hide money, transferred assets to family or friends, and even used safety deposit boxes to escape their financial obligations. These methods are well-known in the court system, and they usually backfire. However, Bitcoin represents a new challenge. The traditional method for ensuring that assets are divided fairly after a divorce ruling is to issue an injunction. An injunction compels the paying spouse to forfeit the property in question or pay the consequences. Although the courts can still require the spouse to reappear in court, defend their actions, and be held in contempt of court, there are other aspects of Bitcoin that legal professionals are concerned about. For instance, there is no central administrator to enforce the court’s injunction.
How Bitcoin Works
Bitcoin, along with other cryptocurrencies, operates in a system that is decentralized. Instead of transferring digital value through a trusted third-party, the wealth is exchanged directly between users. Transactions are not regulated by a state or federal government, and the information that is recorded does not contain personal identifiers. Without a centralized authority, users are largely anonymous (although not completely). Users are assigned a unique series of characters that are associated with their account, and every transaction is documented within the blockchain. It may not be as easy as following a traditional paper trail, but specialized forensic experts can uncover the truth and expose hidden assets.
Once Bitcoins and other cryptocurrencies have been downloaded onto a computer, they can be stored offline on an encrypted USB, also known as a cryptocurrency wallet. This digital wallet can then be stored in a secret location, making it very difficult to trace. However, if there is a considerable amount of money invested in cryptocurrencies, then it is likely that both parties know the wallet exists. Drawing attention to the fact that your spouse is withholding assets that should be on the playing table will not look good for them.
The penalty for submitting false information to the court is severe, but some individuals still attempt to underreport or hide assets. Misrepresenting assets like as jewelry, cash, or Bitcoins may provoke a sharp response from the judge. The delinquent party may be given a smaller portion of the marital assets and face criminal charges, such as perjury. Another severe consequence for lying under oath is a loss of credibility, which can be haunting. With a lack of credibility, the judge may find it difficult to believe that child support or alimony payments are too high for a discredited spouse to afford. The judge may also find certain evidence questionable during child custody hearings, and they may be hesitant to trust anything you say after you have been caught trying to conceal assets. That is why it is crucial for both parties to work closely with their legal counsel and examine all the assets that are involved in the divorce settlement. It is not worth trying to hide or lie about Bitcoin or any other asset during the divorce.
Obtain Informed Legal Insight
Bitcoins are treated like any other asset during the divorce process, and that’s why you need someone on your side who can grasp the reality of virtual investments. The lack of familiarity with Bitcoin may intimidate some legal professionals, but we understand that cryptocurrency is just another phenomenon that the legal profession needs to adapt to. Not only do we represent clients who are dealing with cryptocurrency assets during a divorce, we also accept several cryptocurrencies as forms of payment. You do not want to trust a law firm that has little or no experience with handling these complex assets. You need to hire an attorney who has experience with cryptocurrency and who understands how to represent your best interest. Contact the Law Office of Andrew A. Bestafka, Esq. today by calling (732) 898-2378 or visiting our website.