Family lawyers in England and Wales are reporting a marked increase in cases involving attempts to conceal wealth using cryptocurrency during divorce proceedings, a trend described as a “decade-long surge.” The shift reflects a growing recognition of digital assets as a means of hiding funds, replacing traditional methods like offshore accounts, according to legal experts.
Peter Burgess, Senior Partner at Burgess Mee, characterized cryptocurrency as a “modern manifestation of an old problem of secrecy.” The anonymity afforded by crypto assets is proving attractive to individuals seeking to shield assets from division in divorce settlements. This is particularly prevalent among younger generations, Millennials and Gen Z, who are more likely to have accumulated wealth in digital currencies.
The legal process for divorce in England and Wales requires full financial disclosure via a Form E, a legal declaration of all financial circumstances. However, the form lacks a specific section for detailing cryptocurrency holdings, creating an ambiguity that some spouses are exploiting by claiming to “forget” to disclose these assets. Failure to fully disclose assets can now lead to contempt of court proceedings, with potential penalties including imprisonment or a court awarding a larger share of known assets to the disclosing spouse.
The High Court has increasingly recognized crypto-assets as legitimate “property,” enabling courts to issue freezing orders to prevent the dissipation of these funds during divorce proceedings. This legal recognition is a relatively recent development, responding to the increasing prevalence of cryptocurrency in financial portfolios.
The rise in “Bitcoin divorces” coincides with broader market activity in the cryptocurrency space. Former Goldman Sachs executive Raoul Pal has forecast a potential rally in Bitcoin’s price, predicting a surge to $140,000 based on anticipated changes in bank regulations and liquidity conditions. These changes, including adjustments to the Enhanced Supplementary Leverage Ratio, could allow banks to absorb more government debt, potentially increasing system-wide liquidity and driving up the price of Bitcoin.
However, the cryptocurrency landscape is also fraught with scams. The Bitcoinex platform, for example, has been identified as a fraudulent website employing social engineering tactics to steal funds from individuals lured by promises of free crypto giveaways and high investment returns. The platform exhibits numerous red flags, including a lack of verifiable company information and fake celebrity endorsements.
Blockchain.com provides a public blockchain explorer, allowing for the tracking of Bitcoin transactions, but this transparency does not necessarily prevent individuals from attempting to conceal their holdings or the timing of transactions during divorce proceedings.
