Cryptocurrency has gone from a niche curiosity to a financial asset. However, cryptocurrencies complicate a divorce, especially for high-net-worth couples. During divorce proceedings, they are harder to track and verify ownership than bank accounts, bonds, equities, and income and aren’t confiscable like other assets.
Marital property needs to be appropriately disclosed and appraised so that all assets are equitably divided in divorce. Given the legal repercussions of financial deception during divorce, it is rare for a spouse to knowingly and willingly conceal assets. Still, if this happens, cryptocurrency becomes an ideal method to hide assets during a divorce.
What are the methods through which a spouse can conceal assets using cryptocurrency?
The most common one seems to be through cryptocurrency wallets such as Ledger Nano X/S,
HD (Heuristic Deterministic), which are known to be private, anonymous, and safe. A spouse can hide Bitcoin assets by storing their wallet on a computer or smartphone the other spouse can’t access, including a device outside the United States. A user can buy Bitcoin with cash without leaving a paper trail. It may be impossible to find concealed assets without knowing which wallet belongs to whom, especially if they use ”cold storage,” which secures bitcoins and private keys offline. Cold storage’s security is higher than other choices since private keys are never online. Hardware wallets like Trezor and Ledger allow funds to be spent without private keys leaving the device.
A less private but more secure method is using exchanges, which charge a fee for buying and selling. There are more exchanges besides Coinbase and Kraken. Most are accessible by app or browser. The exchange maintains an owner’s “key” needed to purchase, sell, and convert crypto coins to money.
Untraceable crypto isn’t a new concept, though. Monero, which has been around since 2014, offers private and anonymous digital money transactions. ZCash, Dash, Verge, Grin, ByteCoin, and Firo have also joined. These coins use ring signatures that jumble the sender’s public key with random keys, stealth addresses that mask the original sender’s crypto destination address, and zero-knowledge proofs that don’t require precise information to enhance the anonymity of transactions.
Monero creates a randomized on-time user destination address during a transaction. Ring signatures are mixed with the sender’s public key, mask transaction values, and use obscure wallet addresses to increase anonymity. The ZCash coin uses similar tactics to enable users with anonymous transactions. Other coins like Grin hide transactions and complicate the trail by transmitting them through numerous peers on separate networks, deleting details like the transaction’s origin and amount. Verge currency uses TOR (or The Onion Router, a secure, encrypted protocol that can ensure privacy for data and communications on the web) to disguise sender and recipient IP addresses.
Crypto trading can be hard to link to a person. Still, if your client is going through a divorce, you need to emphasize the importance of disclosing crypto assets. They need to be aware there are ways through which these assets can be uncovered. For example, if cryptocurrency has been used to buy items, linking them to a name and location, tax returns may give a paper trail to detect bitcoin sales through text messages or emails that can be shown in court if no other proof is obtained. The concealing spouse may also have Coinbase on their phone, which the other may have noticed. Bank and credit card records may suggest huge, unexplained online transactions, patterns of tiny ACH (Automated Clearing House) withdrawals, or clandestine financial activities.
The bottom line is that there are various intricate methods that one spouse can use cryptocurrency to conceal assets in a high-net-worth divorce. Although challenging, cryptocurrency can be uncovered with the help of digital experts that can inspect phone and computer data for cryptocurrency activity, analyze records for telltale indicators of someone trying to siphon off, and hide assets.
Sean M. Cleary is the founder and principal attorney at The Law Offices of Sean M. Cleary based in Miami, Florida. He focuses a significant portion of his practice on handling high-net-worth divorces.
The post Tricky Divorces: Is Cryptocurrency Used for Concealing Assets? appeared first on Entrepreneurship Life.||
By: Carson Derrow
Title: Tricky Divorces: Is Cryptocurrency Used for Concealing Assets?
Sourced From: www.entrepreneurshiplife.com/tricky-divorces-is-cryptocurrency-used-for-concealing-assets/
Published Date: Wed, 22 Jun 2022 09:08:27 +0000
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