Crypto currency and their impact within Divorce Proceedings

Feb 16, 2023

The Family Team at Herrington Carmichael is advising more and more couples in divorce proceedings, where one or both of the couple have invested in crypto currency or non-fungible tokens (NFTs).

What are crypto resources and what is crypto currency?

They are a digital form of money created through algorithms and cryptography.
Cryptocurrencies can be used to purchase goods and services, or they can be owned simply as an investment.

What are NFTs?

NFTs are digital assets that are unique and indivisible, making them ideal for representing ownership of digital items such as artwork, music, or digital collectibles. They are stored on a blockchain (see below), providing a secure and transparent way to track ownership and validate authenticity.

What is a blockchain?

A blockchain is like a big digital record book or giant list that can store information about things like who owns what and when something happened. Everyone can see the transactions on a public blockchain (e.g Bitcoin / Transactions — Blockchair), but no one can change it. The transactions are however anonymous.

Where are blockchains kept?

Blockchains are stored on computers all over the world. These computers work together to form a network. Each computer on the network stores a copy of the blockchain, and all the computers work together to ensure that the records are accurate and up to date.

Why do crypto currencies exist?

They were invented by “Satoshi Namamoto” (a pseudonym) to provide a secure and anonymous way to store and transfer value. It was a reaction to the worldwide economic crash of 2008. They are decentralised to make sure that no single entity or government is in control of them. They are intended to provide a secure, decentralised way to store and transfer value without the need for a third-party intermediary.

Can my spouse hide their cyber currency?

In financial remedy proceedings each party to proceedings has a duty of full and frank disclosure, both to each other and to the Court.

A family lawyer’s role is to help navigate you through the disclosure requirements and to help broker a deal based on the evidence of the resources which belong to a party or to which they have access. We help broker deals once we are sure that all the resources have been disclosed and that valuations have been agreed.

A failure to disclose the existence of a resource will place the offending party in contempt of court. At best, the court will draw adverse inferences and at worst, could punish the offender with imprisonment.

If you suspect dishonesty, there are a few companies offering tracing services. You need to make sure any expense is justified and proportionate. You do not want to spend more than the value of the resource establishing its potential existence and value.

How will the court deal with the crypto resource?

The volatility of the crypto market means that the court needs to be quite novel and creative to work out the best way of establishing the values of these resources. They can fluctuate massively from week to week. If you are negotiating an agreement at court, you need to be sure of the value of the resource especially if trading it against another less volatile resource.

The court may be minded to redistribute each type of resource, rather than determining an outcome that sees one party retaining all the risk-laden crypto resources.

If you would like to discuss financial matters, following the breakdown of your relationship, or prior to entering into a new one, with one of our expert family solicitors, please contact us and a member of our family team will be pleased to assist.

This reflects the law and market position at the date of publication and is written as a general guide. It does not contain definitive legal advice, which should be sought in relation to a specific matter.

Aaron O’Malley

Aaron O’Malley

Senior Solicitor, Family Law

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