The importance of Bitcoins in divorce cases
We read somewhere that trust is the new currency. Some say that trust is the glue of life. It’s definitely the most essential ingredient in effective communication. It’s the founding principle that holds all relationships together. But what if the relationship breaks down? What if you are going through a divorce and you don’t trust your partner anymore? What if you found out that he did not tell you the truth about their real bonus package and the risky investments?
Full, frank and clear financial disclosure
In a recent decision High Court Judge Roberts had to decide in B v B  EWHC 4545 about a Husband who was described by the Deputy District Judge as a husband, “who has not helped himself. Too much of his evidence had been produced very late or, in the case of Y Co, had only been discovered as a result of the diligence of the Wife’s lawyers. Whether as a result of arrogance, dishonesty, or both, he had clearly taken the view that he was not going to provide disclosure easily and that had fed the Wife’s suspicions..….’
Full and frank and ongoing clear financial disclosure is vital in financial proceedings. Without the full picture it is impossible for you and your legal team to decide if the offer the other side is making is a fair offer. Without all cards on the table it is impossible for the Judge to give you guidance towards a fair settlement at any Financial Dispute Resolution hearing or to determine a case at final hearing.
But what if a spouse does not want to give full disclosure? We have seen spouses going to immense lengths to create a parallel economy during their relationship and effectively plan for the divorce. Only a couple of days ago a bishop who used to be a banker has been criticised by a High Court judge who concluded that he had hundreds of thousands of pounds in offshore accounts. He was found to have failed to disclose “significant resources” by a judge who was analysing a divorce money fight in a family court. Judge Richard Robinson concluded that the man’s financial “disclosure” to his estranged wife had been “lamentable and not frank”.
Husbands are becoming more and more creative in terms of what they do to reduce their wealth and the courts are struggling to catch up. A growing trend are Bitcoins investments. At Paradigm Family Law we have seen see that more and more international families invest in Bitcoins. The New York Times recently stated that the virtual currency will one day be a part of all presidential campaigns. But its untraceable nature stirs concerns of illegal contributions. But what are Bitcoins and how do they effect a divorce settlement?
When it launched, Bitcoin was dismissed by the European Central Bank as a Ponzi scheme. But in the past two years Germany has recognised Bitcoins as a “unit of account” and firms including Expedia and Dell have begun to accept them. After the election we will see if George Osborne still wants London to be, “a test-bed for alternative payment systems”.
Bitcoin firms, notably Blockchain and coinfloor, have already made London their base. The authors of Cryptocurrency argue that bitcoin has a bright future. Two decades into a digital revolution that has transformed music, retailing and much else, it is odd, they say, that the one thing yet to be revolutionised is something so ripe for reform: money. “Digital currencies have a future,” they write. “The ground-breaking technology has a momentum that will be hard to stop.”
However Bitcoins have been linked to the sale of drugs on “dark” websites. Digital wallets and exchanges have been hacked and emptied. In January 2015 a German Newspaper (Frankfurter Allgemeine Zeitung) reported that hackers had stolen €5 million from the Slovenian Bitcoin Stock Market, which shows how vulnerable the system still is.
Future use of Bitcoins and the trading value
The value has fluctuated wildly, from $1,100 a year ago to around $270 today. Trading volumes are tiny: $50m-worth are exchanged each day, compared with $30bn on the Visa and MasterCard networks.
In 2013 at the private University in Nikosia, Students could pay their University fees in Bitcoins. In the same year Canada announced that they have the first Bitcoin machine for clients and Hungary has become the latest country to get a cash machine or ATM for bitcoins. It has been installed in a bar in central Budapest, the capital.
But why is it so hard to trace Bitcoins in Divorce cases?
Bitcoins are, like cash, very difficult to locate unless you know exactly where to look. At Paradigm Family Law we are working together with global forensic financial analysts on international cases and have seen an emerging pattern in many cases. The bigger problem is to freeze worldwide huge sums of bitcoins or to enforce UK Court orders against the Bitcoins. One of the attractions is that they are quickly moved into another jurisdiction without any bank getting involved.
If you are one of the first investors in Bitcoins and want to know how this effects your pre-nup or divorce settlement and might need some guidance on how the Bitcoins will be dealt with, Paradigm Family Law can help. If you have any queries on this or any other aspect of divorce or separation and finances call us on 0845 6020422 or email us at [email protected] .