For years, cryptocurrency has carried the reputation of being a secretive digital form of wealth that can be moved in the shadows, beyond the reach of courts and regulators. It should come as no surprise that in divorce cases, clients often fear that a spouse could be using crypto to conceal assets.

While crypto is complex and can create challenges in divorce proceedings, it is not totally “untraceable.” In fact, with the right expertise and tools, digital assets can be uncovered, properly valued, and equitably divided.

For family law attorneys, understanding how to approach crypto assets in divorce is becoming increasingly essential.

The Basics: Why Crypto Matters in Divorce

Crypto assets encompass far more than just Bitcoin. They include thousands of coins and tokens, as well as NFTs (non-fungible tokens), staking rewards, and other blockchain-based investments.
What makes crypto attractive for concealment in divorce?

• Pseudonymity: Transactions are tied to wallet addresses, not names.
• Portability: Assets can be moved quickly, even across borders, with a few clicks.
• Lack of familiarity: Many attorneys and clients are still catching up on how crypto works.

At the same time, every transaction on a public blockchain leaves a digital footprint. Unlike hidden cash, crypto leaves behind a trail that can often be followed (IF you know where to look).

How to Discover Hidden Crypto Assets

Client Financial Disclosures

As with any asset, the discovery process begins with disclosures. Attorneys should include specific questions about digital assets in their interrogatories and deposition prep. Common red flags include:

• Unexplained cash withdrawals.
• References to “online investments” or “digital wallets.”
• Sudden liquidity events with no clear paper trail.

Document Review

Tax returns and financial statements can reveal valuable leads. Since 2020, IRS Form 1040 has required taxpayers to answer whether they engaged in digital asset transactions. Bank and credit card statements may also show transfers to exchanges (i.e.: Coinbase, Kraken, Gemini).

Even something as simple as reviewing email records may uncover account creation notices or trade confirmations from exchanges.

Subpoenas and Legal Tools

If there’s reason to believe a spouse is holding assets within a centralized exchange, subpoenas can be issued to obtain records. This approach is most effective with U.S.-based exchanges, which are subject to regulatory oversight. Offshore exchanges and decentralized platforms present greater challenges, but persistence can still yield results.

Forensic Tracing Tools

Specialized forensic analysts use blockchain analytics software (such as Chainalysis or CipherTrace) to follow the trail of transactions across the blockchain. While techniques like mixing or tumbling services are designed to obscure the flow of funds, experts may be able to piece together enough information to link wallets and recoverable balances to an individual.

Valuing Crypto Assets

Once assets are identified, the next challenge is determining their value.

• Volatility: Crypto prices can swing dramatically in a single day, complicating settlement negotiations.
• Date of Valuation: Courts may need to clarify whether valuation should be based on the date of filing, trial, or distribution.
• Custody and Transfer: Ensuring that crypto assets are securely stored during proceedings is critical. Private keys and wallet access must be carefully managed to prevent loss or theft.
• Tax Considerations: Dividing crypto can trigger capital gains tax. Tracking the cost basis is essential to avoid surprises down the road.

Best Practices for Family Law Attorneys

The complexity of crypto means divorce professionals need to adapt their practices to:

• Ask the Right Questions: Incorporate crypto-specific inquiries into standard discovery.
• Work with Specialists: the combination of CDFAs, CBDAs (those Certified in Blockchain and Digital Assets), and forensic accountants with crypto expertise can bridge the knowledge gap for attorneys and clients.
• Secure the Assets: Once discovered, cryptocurrency and other digital assets are treated like other property and may be subject to various legal strategies for handling them (i.e.: escrow, temporary restraining orders, freezing orders).
• Educate Clients: Many clients don’t fully understand the risks or responsibilities of holding crypto. Clear explanations can prevent missteps.

The Bottom Line

Crypto assets may feel mysterious, but they are not invisible. With careful discovery, the right team of professionals, and forensic tools, digital assets can be traced, valued, and divided fairly in divorce.

For family law attorneys, the rise of crypto in divorce is not a passing trend, it’s a growing reality. The best way to tackle this issue is to recognize that it’s growing, and to be open to collaborating with experts when needed.

By demystifying crypto and treating it as another asset class, family law attorneys can protect clients, uphold transparency, and ensure equitable outcomes in an increasingly digital financial world.

Learn More About Crypto’s Growing Role in Divorce Cases

At Crossover Capital, our number one goal is to provide people with the support, knowledge, and access to make informed decisions about their financial futures. Building a foundation for success starts with steady support and a customized approach. Crossover Capital is here to provide the necessary tools we believe are required for growth and to be a champion for our clients’ success.

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Investment advisory services offered through Crossover Capital Brands, LLC (dba Crossover Capital), a Registered Investment Advisor with the U.S. Securities and Exchange Commission.

This material is intended for informational purposes only. It should not be construed as legal or tax advice, and is not intended to replace the advice of a qualified attorney or tax advisor. This information is not an offer or a solicitation to buy or sell securities. The information contained may have been compiled from third party sources, and is believed to be reliable.

Alternative investments – such as hedge funds and private equity/venture capital funds – are speculative and involve a high degree of risk. Likewise, the emergence of digital assets comes with its own speculative characteristics and involves a high degree of risk. Various digital assets have unique features, and the regulatory risk environment continues to change as governance requirements, rules, and lawsuits emerge. There may be material differences in the type of marketplaces available for digital assets, and there could be significant restrictions or limitations on withdrawing from or transferring these types of investments. Digital assets may incur higher fees when compared to traditional assets, and these expenses may offset returns.

Crossover Capital may not be able to independently verify digital asset valuations provided by institutions that hold or offer digital asset services. As a result, Crossover Capital will generally rely on information reported to it by third parties. As such, the information contained herein is for informational purposes. Clients should recognize that they may bear digital asset-based fees and expenses at the manager-level, as well as indirect fees, expenses, and performance-based compensation for digital assets. Spot bitcoin exchange-traded products were recently approved for listing and trading by the SEC. However, such approvals do not indicate SEC approval to use or invest in bitcoin. Clients should remain cautious and aware of the various risks associated with digital assets that have a value tied to bitcoin or other crypto related products.