Cryptocurrencies are becoming a popular choice of asset (some online statistics indicate nearly a quarter of Australians now own them), so they are likely to pose an issue for many separating couples. The three largest cryptocurrencies are Bitcoin, Ethereum and Tether.
In theory, a cryptocurrency should be treated no differently to any other relationship property asset. Both parties should provide full and frank disclosure of all cryptocurrencies held. If either party fails to do so, the other should be able to obtain an order for discovery from the Family Court requiring the production of financial disclosure.
Discovery orders can be made against an ex-partner personally and can also be made against a third party (such as a bank, company, accountant etc). However, it is difficult to enforce discovery orders looking for documentation about cryptocurrencies. This is because:
1. Cryptocurrencies are often purchased through online exchanges, of which there are many, and only a few are New Zealand-based. The exchange should hold details of the cryptocurrencies traded. However, if an ex-partner is not forthright in providing disclosure of their holdings, it could be hard to figure out which exchange they used. Even if you could locate the exchange, it would be uncertain whether an international exchange would comply with an order for discovery from a New Zealand Court.
2. Cryptocurrencies are decentralised digital networks so there is no single person or entity controlling them. They are not usually linked to a particular entity. Therefore, a third-party order for discovery for Bitcoin information for example, would not assist as there is absolutely no-one to arrange the production of that information.
3. Some individuals choose to store cryptocurrencies in non-custodial digital wallets. In this case they alone hold the digital key to access the cryptocurrencies. They could simply refuse to provide the information sought or say they no longer have access to the wallet.
There is scant case law on cryptocurrencies in relationship property disputes in New Zealand. The same is apparently true overseas.
Tools to assist you
I suggest you and your solicitor (possibly with the assistance of a forensic accountant) carefully check all your ex-partner’s bank account statements for unexplained withdrawals or transfers of funds from the accounts to cryptocurrency exchanges. It is possible the funds may have travelled via an overseas bank account.
The bank accounts should at least provide a rough indication of the “initial investment” in the cryptocurrencies and the date they were acquired. From there, it could be difficult to track any further trading of the cryptocurrencies.
There are specialist blockchain analysts you could engage to track the cryptocurrencies if you have some information such as an initial cryptocurrency address. Professor David Hodson (who has considered the issue in an international context) suggests that with this information you could:
1. Apply pressure on the other party to provide disclosure; and/or
2. Ask the Court to make “judicial inferences” and couple this with “offsetting” i.e. asking the judge to award you a greater share of the known assets because it is apparent that your ex-partner has invested in cryptocurrencies, and it is impossible to discover the value of the cryptocurrency. In the context of the New Zealand relationship property legislation this might be mounting an argument that there are “exceptional circumstances” that make it repugnant to justice for the assets to be shared equally.
Jeremy Sutton is a barrister and family lawyer at Bastion Chambers.
