Husband hides $500,000 in bitcoin from wife during divorce. Then, a crypto hunter stepped in

Cryptocurrencies are decentralized and have been flagged as a tool used for money laundering and terror financing, because of the ease at which they can be transferred globally. But in the U.S. people are even using crypto to hide their assets, so that they can avoid paying their spouses as part of divorce settlements. In one case reported by CNBC, a spouse earning over $3 million a year, concealed $500,000 in the form of Bitcoin. He hid the crypto assets in an undisclosed wallet and faced an investigation that lasted for months. The assets were finally uncovered by a "forensic accountant", who acted as a "crypto hunter' to help the man's New York-based ex-wife. 

Rise of Financial Infidelity

The blockchain has become a place for people who are indulging in financial infidelity to hide their cash from their partners by converting it into crypto. In one woman's case, she grew suspicious of her ex-husband's assets a few months into the divorce proceedings.

She sought help from a forensic accountant, who spent half a year to eventually track down 12 Bitcoins worth half a million dollars at the time, that were stashed away in an undisclosed crypto wallet.

The woman, who was married for a decade, told CNBC that she was blindsided by the cryptocurrency investment. “I know of Bitcoin and things like that. I just didn’t know much about it,” she said. The investment was completely hidden away from her as the two never discussed it.

How do Crypto-Hunters Track Assets?

While crypto’s decentralized nature makes it easier to hide, "crypto hunters" now specialize in tracking digital assets, using blockchain analysis. They rely on specialized tools to stay a step ahead of emerging blockchain innovations that focus on privacy and security.

According to the report, forensic experts investigate digital wallets to trace transactions across trading platforms such as Coinsbase. They also look for hidden crypto wallets in digital cold stores that are password-protected. Since most coins and tokens use public ledgers, experts can trace wallet addresses and follow the flow of funds.

Nick Himonidis, a New York-based forensic investigator told CNBC that 25% of his divorce-related cases involve some elements of cryptocurrency. Thus, the growing role of crypto has prompted more attorneys to develop specific skills, to navigate the challenges posed by new digital assets.

New York divorce attorney Sandra Radna told the outlet that she now asks for preservation of assets including hard drives, just as she serves the summons for a divorce. This is done to prevent the destruction of any trail or evidence that forensic investigators can use to determine where the assets are located. While discovering the assets is a challenge, valuing and splitting them is a whole different ball game. 

The Challenge of Valuing Crypto Assets 

Valuation and division of crypto assets carry additional challenges for attorneys due to the volatile nature and fluctuating prices. People often have to make the difficult choice of whether to liquidate the assets or divide them as they are. 

NodeBaron (X user name), a 36-year-old vascular surgical engineer, told CNBC that he liquidated his stake in dogecoin for around $5,000 during his divorce, and six months later he realized that his holdings would have been worth $1 million. “The cost to get a divorce was almost like a million-dollar decision,” he said.

Hence, divorce attorneys advised people to make the decision based on their risk tolerance. The experts told the news outlet that those with a high-risk tolerance can choose to divide the assets in the original form. However, for those looking to build a stable financial base, liquidating cryptos or other digital assets may be the sound strategy.