“Asset protection” has long been a strategy in divorce cases across the United States. The term “asset protection” refers to the use of a legal strategy in order to hide or shield assets from the Bitcoins, a relatively new form of digital money, are likely to advance asset protection into new territory.
Asset protection in divorce cases can take many different forms. Advanced asset protection strategies include money transfers to foreign accounts, the establishment of legal entities (trusts, corporations, limited liability companies), and other techniques.
Holding money in cash (i.e. a bank account) is the simplest and least sophisticated method of asset protection, and may also be the most frequent in divorce cases., inside a home safe or in a bank safety deposit box). In this way, a person that is in the process of divorce believes that he can “protect” the cash from the divorce process. In order to avoid being forced to split the money with his spouse, the divorcing spouse may choose to keep the money’s existence a secret from his partner, the divorce lawyer, and the court. Although this tactic might or might not work, it is undoubtedly illegal because it calls for the person to give false information about their assets to both their spouse and the court.
Through the review of financial records and other methods of legal discovery, an experienced divorce attorney will know how to find hidden assets of this type. However, Bitcoin has the potential to overtake cash hiding as the most popular method of asset protection in divorce proceedings. Given the design of the bitcoin network and the general lack of knowledge among divorce lawyers regarding bitcoins, it may be a far more effective strategy than concealing cash.
By using the alias Satoshi Nakamoto, an anonymous programmer, Bitcoin was the first digital currency to be created in 2009. It is a currency that only exists in digital form. All bitcoins and transactions are “registered” on the bitcoin block chain that is updated by bitcoin users rather than a centralized authority. However, names are not included in the transactions; instead, each bitcoin’s digital identification is included. Owners of bitcoins store them in a bitcoin wallet. The wallet can be any number of devices that store the digital fingerprint of a bitcoin rather than having to be a physical wallet. A computer, a server running a bitcoin wallet website, or even a piece of paper could house the wallet.
While it is theoretically possible to track a bitcoin’s transfer by looking at the block chain, doing so will only reveal the bitcoin’s public identification key rather than the owner’s name. It is possible to learn about the existence of the bitcoins if the wallet is kept on a person’s computer or on a website (where a party to a divorce registered his name). But names are not required to be connected to wallets. Furthermore, if a person uses a “brainwallet” tracing a bitcoin to a specific person becomes almost impossible through any conventional method. When storing bitcoin, a brainwallet is used, which requires a memorized passphrase.
Any divorce lawyer will begin by using methods for finding hidden funds to identify a bitcoin asset protection strategy. Unfortunately, a large majority of divorce attorneys and judges are ignorant of bitcoins and the fact that they can be used to conceal assets. It is impossible to expect a divorce lawyer who is unfamiliar with bitcoins to find hidden bitcoin assets. Make sure your attorney is familiar with the bitcoin system and knows how to find hidden bitcoin assets if you have any reason to believe your spouse may be concealing assets.