Binance Hack: What Happens if Crypto Assets Disappear During a Divorce
Today’s Binance hack has attracted global attention and raised concerns among cryptocurrency investors. With the hack being hailed as the biggest bank heist in human history, and over $6 billion dollars being effectively stolen, many investors will be in a state of panic. Whilst much of the focus has been on the security of digital assets, the incident also highlights an increasingly important issue in family law: what happens to cryptocurrency during a divorce?
As more individuals invest in Bitcoin, Ethereum and other crypto assets, family lawyers are seeing a growing number of cases where cryptocurrency forms part of the matrimonial assets.
Is it included in a divorce settlement?
In short, yes.
Just like bank accounts, investments, pensions and property, cryptocurrency assets must be disclosed during divorce and financial remedy proceedings in England and Wales.
Whether the asset is held in Bitcoin, Ethereum, XRP, or another cryptocurrency, the court will expect full and frank financial disclosure.
The issues
Unlike traditional savings or investment accounts, cryptocurrency presents a number of unique challenges.
- Volatility
Cryptocurrency prices can rise and fall significantly within a short period. An investment worth £100,000 today may be worth substantially more or less by the time a financial settlement is reached or, seconds after the valuation has taken place.
Events such as the Binance hack, regulatory changes or market uncertainty can cause rapid movements in value.
- Hidden Assets
The most common concern during a divorce is whether a spouse has fully disclosed their cryptocurrency.
Cryptocurrency can be held across multiple exchanges, digital wallets, decentralised platforms, or on hardware devices. This presents the real issue that it can be more difficult to identify, and trace, the funds than traditional bank accounts or other financial assets.
- Claims that cryptocurrency has been lost, or hacked.
The Binance incident also raises an important question:
What happens if a spouse claims their cryptocurrency has been hacked, stolen or lost?
In those circumstances, the court is likely to expect evidence, including transaction records, exchange statements and documentation confirming the alleged loss.
Simply asserting that crypto assets have disappeared is unlikely to be sufficient.
Practical Steps if you own Cryptocurrency, and are going through divorce
- Keep good records of all crypto exchanges accounts and wallets
- Have access to transaction histories
- Download account statements regularly
- Maintain evidence of current, and historic, valuations
- Ensure that the cryptocurrency is properly disclosed at the outset.
As cryptocurrency ownership becomes more common, disputes involving Bitcoin and divorce settlements, crypto asset disclosure, and the valuation of digital assets are becoming an increasingly frequent within divorce.
The Binance hack serves as a reminder that cryptocurrency can both be valuable, and vulnerable. If you are separating and you, or your spouse, hold cryptocurrency, or other digital assets, obtaining early legal advice can help ensure that those assets are properly identified, valued, and ultimately dealt with as part of the overall division of assets.
