By this point you probably know a little about bitcoin, the digital currency largely popularized by its initial use in illicit online transactions for drugs and weapons. Bitcoin’s not easily traceable nature makes it difficult to regulate and monitor by governmental bodies. As such, a question arises as to how the American legal system would treat assets kept in bitcoin during divorce proceedings. One article recently covered this topic as it relates to divorce law in England.
The article outlines that Bitcoin can be used to hide assets at stages in divorce proceedings that require financial disclosures. Though unscrupulous, this type of asset hiding may be tempting due to the virtual anonymity in the bitcoin trade. Soon to be divorced spouses can surreptitiously transfer bitcoin between online wallets and may even be able to transfer their bitcoins into the hands of trusted friends for safekeeping until after a divorce is finalized. Reportedly a number of forums have sprung up in which divorcing spouses explore this option of hiding financial assets in bitcoin during legal proceedings.
Treatment of Bitcoin by U.S .Courts
Federal Courts have already caught on to the potential uses of bitcoin to circumvent financial disclosures (in a non-divorce law context) and have treated the bitcoin like traditional currency. Last August, the Eastern District of Texas recognized bitcoin as money when it held that it had subject matter jurisdiction over a case concerning a Ponzi scheme regarding bitcoin investments. A few months later, the Eastern District of California issued a discovery order in a trademark infringement case that specifically ordered disclosures of financial statements from digital banking services such as bitcoin. Cases like these suggest that assets hidden in bitcoin would also be discoverable in state divorce proceedings.
Disclosing Bitcoin or Other Financial Assets in Illinois
After filing for an Illinois divorce, each spouse is required to file a Financial Disclosure Statement. This statement is designed to give the courts an accurate picture of each party’s financial circumstances, including their assets, income, debts and expenses. Each party must swear to the statement and disclose if they made any asset transfers in anticipation of the divorce proceedings. Parties typically exchange disclosure statements toward the beginning of the case and complete updated statements throughout the course of the proceedings. After filing the Financial Disclosure Statements, parties engage in the discovery process where they obtain more specific information and verification concerning each spouse’s financial circumstances.
Successful orchestration of the discovery process is often crucial in obtaining a fair divorce settlement. In the instance that a party has assets in bitcoin, these assets too may be requested and produced during the discovery process. If a party refuses to comply by withholding requested documents and making accurate disclosures during discovery, this conduct may be brought to the court and the withholding party may be sanctioned and or held in contempt of court.
The recent news coverage above concerning holding marital assets in bitcoin illustrates one example of how strategic use of the discovery process can be a useful tool in obtaining favorable results for a client in an Illinois divorce. The DuPage County divorce attorneys at Kathryn L. Harry & Associates, P.C. have extensive experience in this area. Contact our office today at (877) 889-4515 to discuss securing a fair division of your assets in an upcoming divorce.