Bitcoin and other cryptocurrencies are growing in popularity amongst high net worth individuals. This leads to problems when these wealthy individuals divorce form their spouses -cryptocurrencies are proving to be very useful when one wants to hide assets. The introduction of cryptocurrencies in divorce proceedings is proving to be problematic for forensic accountants hired to dig into where assets are located.

Thankfully, there have not been many divorce cases involving cryptocurrencies. However, speculation suggests that in the future they could become more of an issue.

Jeffrey Davidson adds to this sentiment saying that “Trading in cryptocurrency is secret, so the real difficulty is not whether an individual has bought or sold cryptocurrency but what they’ve done with it once they’ve acquired it. There is no money trail. You can hold quite a lot of assets without anybody knowing anything about it. In theory, you could buy a house or a Picasso using cryptocurrency and no one would really know.”

During a recent case that Jeffrey was involved in, an individual had been secretly purchasing art with cryptocurrency.

“This was suspicious. He was still acquiring art but there were no money trails. It became obvious that he was using cryptocurrency to purchase artwork in secret. He eventually admitted to what he has been doing and had to disclose his assets as part of the separation proceedings.”

“It can be difficult for forensic accountants to uncover assets obtained using cryptocurrency, so you try to find the side door because the front and back door won’t tell you anything.”

“People’s financial behaviour patterns can be relatively stable and then suddenly with change. So you look for patterns and any anomalies. You’re effectively looking for what you can’t see, and that will be the clue.”

Read Jeffrey’s comments in Accounting Technician