Whether it is the case of a judgement-debtor who simply will not pay, or that of a spouse in a divorce keen on hiding their assets, proving someone has a sizeable amount of money in cryptocurrency can be quite a challenge. When consulting with clients we advise them that there are a number of ways to discover the hidden cryptocurrency assets of a defendant in a civil suit. These methods include:
- Subpoenaing via the court the defendant’s financial records: This can include bank statements, credit card statements, and investment account statements. If the defendant has any cryptocurrency assets, they are likely to be listed on one of these statements.
- Serving a court subpoena on cryptocurrency exchanges: Cryptocurrency exchanges are required to keep records of all transactions that take place on their platform. By serving a subpoena on a cryptocurrency exchange, the plaintiff can obtain information about all of the transactions that the defendant has made through the exchange.
- Using blockchain analysis tools: Blockchain analysis tools can be used to track the movement of cryptocurrency transactions. By using these tools, the plaintiff can identify all of the cryptocurrency addresses that the defendant has used.You will need a cryptocurrency expert for this purpose.
- Hire a forensic accountant:Where the search is complicated, we sometimes advise clients to hire forensic accountants who are experts in tracing assets and that their findings have a great evidential value.
It is important to note that discovering hidden cryptocurrency assets can be a costly, complex and time-consuming process. However, with the help of a qualified attorney and the use of the right tools, it is possible to track down even the most well-hidden cryptocurrency assets.
Here are some additional clues we advise a client to look for, to discover hidden cryptocurrency assets of an individual, especially an ex-spouse keen on keeping their wealth to themselves:
- Look for red flags: There are a number of red flags that can indicate that a defendant may be hiding cryptocurrency assets. These red flags include:
- The defendant has recently become interested in cryptocurrency.
- The defendant has made large cash withdrawals from their bank account or your joint accounts.
- The defendant has suddenly purchased expensive assets, such as cars or houses having no visible, sizeable income.
- The defendant has suddenly changed their spending habits.
- Talk to witnesses: Witnesses may be able to provide information about the defendant’s cryptocurrency holdings. These witnesses could include friends, family, co-workers, or business associates.
- Use social media: Social media can be a valuable source of information about the defendant’s cryptocurrency holdings. By searching the defendant’s public social media accounts, you may be able to find posts about cryptocurrency, or even pictures of the defendant with cryptocurrency.You can also see if they are members of cryptocurrency advise or fan groups and read their contributions to these groups. Obviously, to access the social media accounts and emails to review their messages directly you will need court intervention if you and your spouse have separated before divorce. If you are looking for advice with regard to discovery of hidden cryptocurrencies of a defendant or an ex-spouse, feel free to email us at [email protected] for legal consultation.
Detailed Client Information Article follows below:
In a civil suit, particularly in divorce proceedings, discovering hidden cryptocurrency assets of a defendant involves a multifaceted approach that leverages legal, technological, and investigative techniques. Here are the primary methods employed:
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Discovery Process: The discovery process is a critical phase in litigation where each party can request information and documents from the other. In the context of cryptocurrency, specific interrogatories and requests for production can be tailored to uncover digital assets. For example, you can ask the defendant to disclose all cryptocurrency transactions and holdings, including wallet addresses, exchange accounts, and transaction histories.
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Subpoenas: Subpoenas can be issued to cryptocurrency exchanges and other financial institutions to obtain records related to the defendant’s accounts. This is particularly effective if the defendant has used reputable exchanges that comply with Know Your Customer (KYC) and Anti-Money Laundering (AML) regulations, as these exchanges will have detailed records of transactions and account holders.
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Forensic Accounting: Engaging a forensic accountant with expertise in digital currencies can be instrumental. These professionals can analyse financial records, identify irregularities, and trace cryptocurrency transactions. They can also help interpret blockchain data to locate wallet addresses and track the flow of funds.
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Blockchain Analysis Tools: Utilising blockchain analysis tools can provide insights into cryptocurrency transactions. These tools can track transactions on the blockchain, link them to known wallet addresses, and identify patterns that might indicate hidden assets. They can also help correlate on-chain data with off-chain activities to build a comprehensive picture of the defendant’s holdings.
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Expert Testimony: Involving experts who can testify about the nature of cryptocurrency and the methods used to conceal it can strengthen your case. They can explain the complexities of blockchain technology to the court and provide expert opinions on the likelihood of hidden assets based on the evidence presented.
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Electronic Discovery (e-Discovery): Examining the defendant’s electronic devices, such as computers, smartphones, and tablets, can reveal digital wallets and transaction records. E-Discovery can uncover software wallets, transaction histories, and communication about cryptocurrency transactions. It may also reveal evidence of account registrations with exchanges or other crypto services.
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Affidavit and Deposition: During depositions, the defendant can be questioned under oath about their cryptocurrency holdings. An affidavit requiring the defendant to disclose all assets, including digital currencies, can be requested. Non-disclosure or false statements can have legal consequences, which might incentivise truthful disclosure.
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Social Media and Online Presence: Investigating the defendant’s social media accounts and online activities can provide clues about cryptocurrency holdings. Posts, comments, and interactions on platforms related to cryptocurrency can indicate involvement in digital currency investments.
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Public Records and Financial Statements: Reviewing public records and financial statements for any discrepancies or unexplained wealth can help identify hidden assets. Look for large unexplained transfers, sudden decreases in traditional asset holdings, or significant lifestyle changes that might indicate hidden cryptocurrency wealth.
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Legal Remedies: If there is strong suspicion of hidden assets, legal remedies such as asset freezes, injunctions, or court orders compelling disclosure can be sought. These measures can prevent the defendant from transferring or liquidating cryptocurrency assets during the proceedings.
By employing these methods, you can build a robust case to uncover hidden cryptocurrency assets in divorce proceedings or other civil suits. The integration of legal tools, forensic investigation, and technology is crucial in navigating the complexities of digital assets.
What cross border legal issues may arise in such situations ?
In the context of discovering and litigating hidden cryptocurrency assets in divorce proceedings or other civil suits, several cross-border legal issues can arise due to the inherently global and decentralised nature of cryptocurrencies. Here are the primary issues that may emerge:
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Jurisdictional Challenges: Determining the appropriate jurisdiction for legal action can be complex when dealing with cryptocurrencies. Cryptocurrencies are not confined to any single geographical location and can be held in digital wallets or exchanges across multiple countries. Deciding which court has jurisdiction to hear the case and enforce orders can be challenging, especially if the defendant or their assets are located in a different country.
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Compliance with International Laws: Different countries have varying regulations regarding cryptocurrencies. What is considered legal and regulated in one jurisdiction may be illegal or unregulated in another. Ensuring compliance with international laws and understanding the legal landscape of each involved country is essential. This includes understanding anti-money laundering (AML) and know-your-customer (KYC) regulations across jurisdictions.
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Enforcement of Court Orders: Enforcing court orders across borders can be difficult. If a court orders the disclosure of cryptocurrency assets or the transfer of funds, ensuring compliance when assets are held in foreign exchanges or wallets can be problematic. Mutual legal assistance treaties (MLATs) and international cooperation agreements are often required to enforce such orders.
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Data Privacy and Protection Laws: Different jurisdictions have varying laws regarding data privacy and protection. Conducting electronic discovery (e-discovery) or subpoenaing information from foreign entities must comply with these laws. For example, the European Union’s General Data Protection Regulation (GDPR) imposes strict requirements on data handling and transfer, which could affect the ability to obtain necessary information.
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Asset Tracing and Recovery: Tracing and recovering cryptocurrency assets across borders can be technically and legally challenging. The pseudonymous nature of cryptocurrencies can make it difficult to identify asset holders. Even when identified, recovering assets from foreign jurisdictions involves navigating complex legal systems and may require the assistance of international legal experts.
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Taxation Issues: Tax implications of cryptocurrency transactions vary by country. Identifying and valuing hidden cryptocurrency assets for purposes such as division of property or asset seizure may involve complex tax considerations, including the need to understand how different jurisdictions tax cryptocurrency holdings and transactions.
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Exchange Regulations: Cryptocurrency exchanges operate under different regulatory frameworks depending on their location. When attempting to subpoena records or freeze assets held in exchanges, understanding and navigating the specific regulatory requirements of those exchanges is crucial. Some exchanges may not cooperate with foreign legal requests without specific international legal agreements in place.
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Extraterritorial Reach of Domestic Laws: Some countries have laws with extraterritorial reach that may apply to cryptocurrencies. For instance, the United States’ Foreign Account Tax Compliance Act (FATCA) requires foreign financial institutions to report information about financial accounts held by U.S. taxpayers. Understanding the extraterritorial implications of domestic laws on foreign-held cryptocurrency assets is important.
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Legal Representation and Costs: Engaging legal representation in multiple jurisdictions can be costly and complex. Coordinating between legal teams in different countries to ensure a cohesive strategy requires careful planning and significant resources.
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Cultural and Legal Differences: Differences in legal culture, practice, and interpretation of laws can pose challenges. For example, some jurisdictions may have more robust frameworks for dealing with digital assets, while others may lack the necessary legal infrastructure, leading to inconsistent or unpredictable outcomes.
Addressing these cross-border legal issues requires a comprehensive and coordinated approach involving legal experts with international experience, forensic accountants, and cooperation between jurisdictions to ensure effective discovery, litigation, and enforcement of court orders regarding hidden cryptocurrency assets.
