Consideration of crypto-assets during divorce
Crypto-assets have properties that are fundamentally different to the assets family lawyers are used to dealing with and if they are not dealt with properly they could cause complications. Special consideration needs to be given when virtual assets are involved and obtaining specialist legal advice is essential.
Disclosure
The usual first step when considering the division of assets within the divorce process is the exchange of full and frank financial disclosure with your partner. It is not possible to accurately advise on a divorce settlement without knowledge of what matrimonial assets you and your partner own and their value.
Recent case law has found that crypto-assets are to be treated as ‘property’ under the law of England and Wales. It is therefore likely that assets of this nature will be dealt with by the Court in a similar manner to other assets, such as your family home or a savings account. For this reason, any crypto-assets owned by you or your partner should be disclosed in full.
The difficulty that arises is that crypto-assets don’t have a physical presence. All crypto-currency is held on the ‘blockchain’, a decentralised ledger, and as such, owners are able to secure anonymity. This makes crypto-assets difficult, though not impossible to trace/easier to hide and therefore extremely attractive to someone intent on providing a false impression of their financial position during the divorce process. JMW have strong contacts with expert forensic investigators who can assist with tracing crypto assets.
A person may also be looking to dispose of crypto-assets to distort their financial position. Your partner may think that by selling their crypto-currency without your knowledge, they won’t have to account for this in the overall financial settlement. If so, consideration might be given to freezing your partner’s virtual investment portfolio until the conclusion of the financial remedy proceedings. This can be done by way of an application to the Court and will ensure your partner cannot deplete assets before your interest in them is realised. If we prove that assets have already been sold, the court has the power either to claw the assets back or give more of what remains to you instead.
Lawyers will need to remain vigilant as to the existence of these assets, and the instruction of an appropriate expert to forensically analyse a financial situation will often be required.
Valuing assets
Once the disclosure process is complete, it is important to place a value on each matrimonial asset. The divorcing couple are often encouraged to agree the value of assets, however if this is not possible, an expert can be instructed to provide a valuation. For example, it may be that they cannot agree the value of the family home. In this instance, a surveyor can be instructed on a joint basis to provide the parties with a figure to be used in ongoing negotiations.
The difficulty with crypto-assets is that their value can fluctuate wildly over a short period. This can change from day to day and the market is significantly more volatile than the majority of other investments.. The implications of this on divorce proceedings can be catastrophic. A proposal to settle can go from being generous, to being grossly unfair in a short period of time.
When crypto-assets are involved, lawyers will need to act quickly to any change in the market, and be aware of how this can affect the division of assets. Expert reports can be obtained to assess the value of crypto-assets, but it is clear this needs to be under constant review.
Conclusion
The nature of cryptocurrency can be difficult to assess and the landscape is constantly evolving. It is essential to know what options are available in good time to ensure you receive a fair division of assets following a divorce. JMW are a full service law firm who can assist with a variety of issues when considering crypto-assets. If you have any queries or concerns regarding the above, please do not hesitate to contact us.
