- Financial infidelity has become increasingly sophisticated, as investors “hop” coins across blockchains and sink their cash into metaverse properties.
- CNBC spoke with divorce attorneys from Florida, New York, Texas and California, blockchain forensic investigators, financial advisors, spouses who were hunting down virtual coins and some of the crypto holders themselves to find out how crypto plays into divorce.
A few months into her divorce proceedings, Sarita thought it was suspicious that her spouse, who earned $3 million annually, didn’t have many assets. After spending half a year on discovery and enlisting the help of a forensic accountant, the New York housewife eventually tracked down 12 bitcoins — then worth half a million dollars — in a previously undisclosed crypto wallet.
Sarita, who was married for a decade and asked to use a pseudonym to protect herself from retaliation, said she felt blindsided by her husband’s cryptocurrency investment.
“I know of bitcoin and things like that. I just didn’t know much about it,” Sarita said. “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.”
The world of financial infidelity has become increasingly sophisticated, as investors “hop” coins across blockchains and sink their cash into metaverse properties. An NBC News poll found that 1 in 5 Americans have invested in, traded or used cryptocurrency, with men between the ages of 18 and 49 accounting for the highest share of all demographic groups.
CNBC spoke with divorce attorneys from Florida, New York, Texas and California, blockchain forensic investigators, financial advisors, as well as spouses who were either hunting down virtual coins or the crypto holders themselves. Most agree that the law can’t keep up with all the new ways that people earn and safeguard digital assets that largely exist outside the reach of centralized intermediaries such as banks.
Family and marital law attorney Kim Nutter said she first dove into the crypto vernacular in 2015 but that the state of Florida, where her practice is based, only recently inserted “cryptocurrency” into the standard request for production of documents — a key part of establishing the couple’s marital property during the discovery process.
“I really still think the law is trying to catch up with this novel form of currency, even though it’s been around for quite a while,” Nutter said.
“What I find in litigation is because this is so new to all of us, even the most seasoned attorneys — unless you’re really going out of your way to study this — educating the court, knowing what to ask for, and finding the right experts, it’s much more of a scramble to me than other areas of law which had been around much longer,” she said.
Hunting hidden crypto stashes in divorce has created an entirely new job category of forensic investigators. CNBC spoke with several of these crypto hunters, and they say that while the blockchain is a public ledger, some spouses have become very good at covering their financial tracks.
“If you have a spouse that’s very tech savvy, and one that isn’t, it can be somewhat easy to hide those assets,” divorce attorney Kelly Burris told CNBC.
“The thing with cryptocurrency is it’s not regulated by any kind of centralized bank, so usually you can’t subpoena somebody and get documents and information related to somebody’s cryptocurrency holdings,” Burris said. She said she sees explicit cryptocurrency requests in discovery in 40% to 50% of her cases.
The Austin, Texas-based attorney told CNBC that the ideal way to get information on a spouse’s crypto holdings is to subpoena that information from a centralized crypto exchange. Otherwise, the process often involves a forensic analysis of their computer or phone to identify a wallet address and then a subsequent blockchain analysis.
“Crypto asset forensics, cryptocurrency forensics, and blockchain forensics have become a significant part of our practice and by far, the fastest growing part of our practice,” said Nick Himonidis, a New York-based forensic investigator.
Himonidis, who is also a licensed private investigator and a computer forensic expert, estimates that 25% of his divorce-related cases involve some elements of cryptocurrency. Some of those cases, he said, are simple and straightforward — situations where, for example, a cryptocurrency such as bitcoin is a custodial asset held in a brokerage account or on a trading platform such as Coinbase.
“These companies keep records just like your broker at Morgan Stanley would keep records of your trades,” he said.
Other cases are what Himonidis describes as the “whole enchilada.”
“They’re calling us because they want to get us appointed as the neutral forensic…
Read More: How spouses hide assets, crypto hunters find them