Crypto Assets and Family Law: Case Studies

1. Non-Disclosure of Cryptocurrency Assets

Powell & Christensen

The court dealt with the valuation and disclosure of cryptocurrency assets during a property settlement. Mr. Christensen had invested in cryptocurrencies both personally and through his business but failed to provide full disclosure of his cryptocurrency holdings, complicating the valuation process. The cryptocurrency purchases occurred while the husband was under a restraining order not to dispose of any property owned by him. The court inferred that the best evidence of value was the purchase price, determined using bank statements showing the transfers for the original purchases. Given the husband’s failure to provide adequate documentation, the court added back the full purchase value of the cryptocurrencies to the asset pool, treating the purchase as a premature distribution of property.

Rasheem & Rasheem

The Rasheem & Rasheem case involved multiple hearings touching on the valuation and disclosure of cryptocurrency assets in the context of spousal maintenance and property settlement. Similar to Powell & Christensen, Mr. Rasheem did not fully disclose his cryptocurrency transactions, leading to questions about his financial capacity and making it difficult to ascertain the true value of his assets. The wife collected evidence from the online platform used by the husband for crypto trading before and after their separation. The court found Mr. Rasheem’s explanations unconvincing and inferred that he had available assets from his cryptocurrency dealings. Although inconclusive, expert evidence was used to estimate the value of the undisclosed cryptocurrency transactions, which were added back to the asset pool.

2. Cryptocurrency Storage

Beck v Wilkerson

This case, from the Family Court of New Zealand, involved a dispute over the valuation and division of cryptocurrency assets during a divorce. The husband had engaged with his brother-in-law in mining operations of Litecoins, for which they had purchased specific hardware. During the proceedings, the parties could not agree on the number of Litecoins that were mined nor their location. The wife asserted the husband had spent them, while the husband accused the wife of having stolen the mobile phone on which they were stored. In the absence of solid evidence, both parties were unsuccessful in their claims regarding the Litecoins. The judge declared the Litecoins to be jointly owned by the parties and ordered that they be equally shared if ever retrieved.

Chaves & Chaves

The husband sought the return of a USB stick, which he claimed contained the key to Bitcoins valued at $35,000. The wife had possession of the USB stick but stated that she and her lawyers were unable to access the information on it. The husband suspected that the wife and her lawyers had accessed the USB stick and repatriated the funds or that the funds had been lost. The court could not resolve the dispute regarding the USB stick and the Bitcoins. It was noted that no further harm would be done if the USB device remained where it was for the time being.

3. Wasteful Conduct and Speculative Investments

Fallins & Fallins

The husband conceded during cross-examination that he had spent $100,000 post-separation on buying cryptocurrency (Bitcoin) and had lost the entire amount. He claimed to have been caught in a scam. Regardless of whether the seller was genuine, the husband had wasted $100,000 of joint funds. He did not disclose this conduct in his affidavit, and the wife was unaware of the Bitcoin investment until the trial, which negatively impacted his credibility and the court’s assessment of his contributions. The court found that the husband had wasted joint funds on speculative investments without informing the wife and included the $100,000 lost in Bitcoin as an add-back in the asset pool, attributing this amount to the husband.

Conclusion

Cryptocurrency assets introduce significant complexities into Family Law proceedings. Courts have shown a willingness to take a cautious approach, relying on purchase prices and expert evidence when valuations are unclear. However, full disclosure and proper documentation are essential to ensure a fair and equitable settlement. By understanding these complexities and seeking appropriate expert advice, divorcing parties can better navigate the challenges posed by cryptocurrency assets.

References to cases:

• Beck v Wilkerson [2019] NZFC 9883
• Chaves & Chaves [2019] FamCA 1022
• Fallins & Fallins [2022] FedCFamC1F 495  
• Powell & Christensen [2020] FamCA 944
• Rasheem & Rasheem [2022] FedCFamC1F 248
• Rasheem & Rasheem (No 4) [2023] FedCFamC1F 690