bitcoin divorceJane Croft, writing in today’s Financial Times points out warnings from lawyers, that Bitcoin is fast becoming the weapon of choice for hiding assets in a divorce battle. Because of Bitcoin’s relative anonymity many husbands are choosing to use it as a medium of investment and thereby avoiding a full disclosure of assets. Within the UK, divorce settlements are seen as particularly generous to wives; courts have taken the view that homemakers contributions are equal  to those of the breadwinner, therefore, a fifty: fifty split of assets is generally the norm. There is also the problem that more and more parties to divorce proceedings are alleging that the other partner is not making a full disclosure of their assets, that they are, in fact, concealing wealth.

Ayesha Vardag, a London divorce lawyer, is warning that more and more Lawyers are considering orders for financial disclosure, there is a strong suspicion that digital currencies are being used to hide wealth.

“They can be used to run a parallel economy,” she said. “People will go to immense lengths,  as a spousal claim is more damaging than tax because it is half your wealth.”


[dropcap size=small]A[/dropcap]lready a number of online forums have seen husbands seeking information on bitcoins as a means of hiding assets. Bitcoin provides relative anonymity to investors and, unlike bank accounts and share holdings, they are almost impossible to link to a particular individual. Although traditional fiat currencies have to be declared as part of a financial disclosure order, bitcoins have, so far, not been investigated as a means of holding wealth. Frank Arndt, head of international family law at Stowe Family Law, said that he expects bitcoins could become an asset to be disclosed in future divorce cases:

“Husbands are becoming more and more creative in terms of what they do to reduce their wealth and the courts are struggling to catch up. It’s just like when the internet started and it was difficult for courts to catch up,”

Last November, the District Court for the Eastern District of California issued a discovery order in a trademark infringement case involving Entrepreneur Media Inc. It ordered the disclosure of financial statements from the defendant including any use of digital banking services such as Bitcoin.

Ms Vardag said there was no reason a similar disclosure order could not be obtained from the English courts.

Last year, Michelle young was awarded a multi-million settlement of circa £20 Million after divorcing her husband Scot Young. Mr. Young had claimed he was de-facto penniless and could not afford to pay. Michelle Young claimed that he was worth millions. Justice Moor noted that Mr Young was said to be hiding very considerable assets and found he had “misled the court as to his finances to a very significant extent” by failing to disclose assets.

The question we must ask, however, is : What censure will the courts apply to those that hide assets via bitcoins? How will the courts enforce an order of disclosure on assets converted to bitcoins? It is easy to legislate but perhaps the courts may well find it, not to be as easy to enforce their rulings.