How wealthy spouses are hiding crypto assets worth millions during divorce cases as lawyers turn detective to hunt down secret stashes

Rich spouses embroiled in divorce battles are increasingly concealing their fortunes in cryptocurrency asset stashes to protect them from ex-partners and their lawyers.

There are warnings that trading in digital currencies is making it harder to trace potential wealth to be shared by courts when couples go their separate ways.

Assets such as properties, stocks and shares and UK bank accounts have long been seen as easy to quantify when it comes to divorce settlements.

But there has been a surge in recent years in the value of crypto investments -currently estimated to be worth £2.26trillion worldwide, including a current market cap of £1.308billion for Bitcoin and £231billion in ethereum. 

Crypto is a virtual currency, stored in digital wallets and operating independently from more traditional, central banks.

While one bitcoin cost £295 on January 1 2016, it would now be worth £48,473 based on today’s prices – 164 times the value a decade ago. 

While people going for divorces in England and Wales must make ‘a full, frank and clear disclosure of all your financial and other relevant circumstances’ in a Form E, there is no specific stipulation for declaring crypto assets.

Law firms say these should be declared under ‘other assets’ – but have highlighted dealing with warring parties they suspect of keeping secret such investments.

Cryptocurrency is becoming increasingly popular as a method of concealing assets during a contentious divorce, experts say

Alex Breedon, partner at law firm Withers, told of handling cases in which millions of pounds’ worth of cryptocurrency assets were ultimately discovered.

Playing detective to track down such investments could involved ‘the most fruitful hunting grounds’ such as bank statements, public crypto ledgers and physical tech devices, he told the FT.

Meanwhile, Peter Burgess, senior partner at law firm Burgess Mee, said: ‘It used to be that people parked their money in offshore trusts, companies and so on.

‘Obviously that still goes on, but increasingly we do see people doing it in crypto. Across the next 10 years, we’ll see a lot more of these cases coming through.’

And Matt Foster, a senior associate at Charles Russell Speechlys, told of lawyers becoming increasingly ‘au fait’ not only with hidden crypto cash but also fears raised by estranged partners – even if not necessarily justified.

He said: ‘It seems inevitable that issues of non-disclosure and ‘hidden’ cryptocurrency will continue to increase in divorce cases, whether actual or simply perceived by a suspicious ex-partner.’

Lawyers are increasingly attending seminars on the subject and calling in forensic accountants for extra help in the highest-worth disputes, he added. 

Toby Yerburgh, partner and head of family law at Collyer Bristow, offered tips to people involved in such cases and worried about potential hidden crypto stashes.

He today told the Daily Mail how people were becoming increasingly aware of the cryptocurrency ‘live issue’ – including what he called ‘cryptocurrency bores’ who are keen to boast about rather than conceal their involvement.

Mr Verburgh said: ‘It’s one of those things enthusiasts tend to want to tell everyone about – and will leave traces in accounts somewhere.

‘But there are others for whom it might well be possible to hide their assets from your spouse and from the taxman.

‘If they’re funding their cryptocurrency from regular money accounts, it could be possible for them to keep it secret.’ 

He also said the increasing use of cryptocurrency was making it ‘tricky’ to value potential divorce settlement shares, saying: ‘It’s a very volatile asset.

‘Divorces can take a year to happen – in that time, you can start with a huge amount and then and the end of the year it’s only worth half that.’ 

Some forensic accountants now specialise in tracking cryptocurrency, using sophisticated analysis of blockchain transactions to trace hidden assets.

Spouses are found to have developed tactics such as using anonymised digital currencies such as Monero, described as being almost impossible to trace.

‘Cold storage’ wallets are another option, in which a cryptocurrency passkey is stored on a physical device such as a thumb drive easily portable and inaccessible online.

One case cited was that of a woman who suspected her husband had concealed crypto investments, after discovering handwritten notes featuring long numbers.

A family lawyer who did not want to be named told how she managed to get disclosue and freezing orders from a court against her husband and a cryptocurrency exchange, making him reveal he did have such assets. 

In a previous case across the Atlantic, 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. 

The woman became suspicious because her husband, who earned some $3million a year, wasn’t disclosing many assets in the divorce case, prompting her to enlist a forensic accountant.

The wife, who did not want to be named for fear of retaliation, said following the case: ‘I know of bitcoin and things like that. I just didn’t know much about it.

‘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.’ 

Michal Stepniak, associate in the family team at Simkins LLP: ‘Crypto and digital assets are fast becoming a staple of modern wealth.

‘But without a lawyer who truly understands how these virtual fortunes work and how they should be dealt with, you could end up waving goodbye to a substantial sum.

‘In a world of Bitcoin, wallets and private keys, failing to get the right advice could mean leaving serious money on the table.

‘It is not uncommon to see spouses argue that their cryptocurrency holdings are simply too volatile to be given any meaningful value, due to the nature of the market.

‘But the truth is that most investors are not dabbling in obscure digital tokens – they are holding the heavyweights.

‘Cryptocurrency is often marketed as secretive and untraceable and individuals will try to rely on the anonymity that digital assets market themselves for.

‘However, in reality, digital transactions leave a trail which, with the right expertise, can be followed.’  

Meanwhile, Sarah Jane Lenihan, partner at Dawson Cornwell, said: ‘In my experience, deliberate non-disclosure remains the exception rather than the rule, and failing to provide full and frank disclosure can have very serious consequences, including imprisonment for contempt of court.’

But she added: ‘We are seeing crypto feature more regularly in high-value cases.’

Mr Yerburgh previously told the Daily Mail’s This Is Money: ‘If your spouse has made a fortune in this area, they have a duty to disclose such assets in exactly the same way as any other asset class.

‘And the penalties for deliberate non-disclosure can be very severe, from costs penalties to fines and prison.’

But he warned: ‘If you know or have very good reason to suspect your spouse has not disclosed their crypto assets, you are going to need specialist help to uncover and preserve them by means of a freezing order. 

‘Telltale signs of crypto ownership may be found in bank statements where payments have been made to coin exchanges, in chat rooms where your spouse may have discussed their latest purchases and in your spouse’s browsing history on the family PC.’