There are currently over 20,000 different crypto currencies worldwide and over 15% of individuals in the UK have traded crypto-assets. Clearly, cryptoassets are an increasingly popular investment asset and as such the disclosure of such crypoassets in divorce is becoming ever more an important aspect when dealing with the separation of assets following the breakdown of a marriage or civil partnership. 

Cryptoassets are easier to hide from a spouse than many other assets. Where a party in a divorce decides to hide cryptoassets or argue that they can no longer access the asset we have an expert internal forensic team and external blockchain analysis experts who can assist. We explain more about this below.

Duty of disclosure

During financial proceedings following the breakdown of a marriage or civil partnership both parties are obliged to provide full and frank disclosure of their financial positions.  This is usually completed on a template document named a Form E statement. The template Form E does not currently have a specific section dedicated to crypoassets but this is bound to change in the future. There is no doubt that any cryptoassets which are owned should be mentioned when completing a Form E somewhere in Part 1 of Section 2 (page 5 onwards). Ideally, full details of type of cryptoasset, size of holding and where it is held should be disclosed. This should involve the wallet addresses and public keys being disclosed along with any transaction accounts.

How we have helped

We are able to help you compile your disclosure and help analyse if your former partner has provided full details of any cryptoassets they own. We have previously acted in reported judgments when we were able to:

• obtain a worldwide freezing order against a party considered unlikely to be truthful about their cryptoassets;
• set a precedent confirming that a trust could exist over cryptocurrency,
• remove a party’s right to spend monies on legal costs and living expenses due to their breach of a freezing injunction;
• prove contempt of court against a party who lied about his cryptocurrency assets; and
• imprison a party for 18 months for contempt of court.

If the other party does not provide accurate disclosure of their cryptoassets we can help you investigate and challenge their position. We will ask you whether your ex-partner ever discussed or mentioned their crypto investments during the relationship. You might have seen a digital currency app on their mobile phone or seen them managing their crypto

An example of a transaction hash is here. With one or more of these transaction hashes our crypto-investigation department or blockchain analysis expert can undertake a preliminary analysis on the blockchain.

When requesting records from cryptocurrency exchanges, identification documents (usually a passport or driving licence) would be useful as well as phone numbers and email addresses. It is also sensible to send the exchanges the blockchain transactions and/or deposit addresses. A court order will be needed in order for an exchange to comply with a request (without a court order any exchange will just cite data protection/privacy and refuse to engage) but with a court order most exchanges will be amenable to providing the information as to the spouse’s cryptoassets. The court order for disclosure could also target the defaulting spouse’s email account(s) where much of the information about their crypto-trading is likely to be.

Tax treatment of cryptoassets

The tax treatment of cryptoassets should be not forgotten. If the cryptoassets have increased in value since they were purchased they may be subject to capital gains tax. An accountant may need to be instructed to advise on the likely tax implications given the volatile nature of cryptoassets in order to prepare for court hearing(s).

For more information please phone one of our offices or contact us via email.