It may all come crashing down, but if it doesn’t the cryptocurrency market is your newest headache in trying to find hidden assets.

Long written off by many as a joke, cryptocurrencies are still dismissed by many as a bubble waiting to burst. Just the other day, the Wall Street Journal ran this piece arguing that Bitcoin (the largest and original cryptocurrency) is way overvalued.

Launched in 2009, Bitcoin was worth almost nothing for several years. At the end of 2013 it suddenly rose to almost $900, but then fell and never got back to that level until January of this year. Now, Bitcoin is worth $4,600, supposedly driven upward by residents of countries not thrilled by the prospect of devaluation of their home currencies, confiscation/destruction of other property, or both: Venezuela, Korea, and China lead the way, but you can think of other good candidates.

Some true believers in Bitcoin think it should be worth $250,000 to $500,000 in 13 years, based on the idea that by design it can’t be inflated like paper currencies, and assuming cryptocurrencies get to just five to ten percent of the world’s share of payments (and that Bitcoin has about half of that cryptocurrency share).

Most famous as a means for criminals to transact business with little trace, mention of Bitcoin has been enough to get you laughed out of the room in polite company.

But what if $4,000 today could turn into $500,000 in 2030? Would your spouse want to take a chance with $25,000 to have more than $3 million later in life? Especially when it’s hard to trace? If so, read on.

Cryptocurrencies are really nothing more than entries into a big database that record your purchase. The database uses something called blockchain technology, which ensures that the records are decentralized. The record is spread all over the chain and most importantly, once a transaction is confirmed it can’t be changed. Blockchain is for real, and many law firms are investing in it as the future of contracting. You can read more about its world-changing potential in the recent cover story of Fortune Magazine.

How can you tell if someone owns Bitcoin or another crypto? There is no ownership record by name, necessarily. In the U.S. many websites that will sell you bitcoin have to take your name and other identifying information, but they will let you send the bitcoin anywhere you want — no names required. Privacy at other sellers is higher. If you buy bitcoin overseas, the transaction can be completely anonymous.

For asset searches, the first thing to find would be evidence of dollars turned into bitcoin. Have there been bank or Western Union transfers to places named Coinbase (or anyplace with the name Coin in the title), GDAX, CEX.IO? Any cash coming in from such places to pay a few bills?

Are there any records of such currencies inadvertently left around or on the computer you and your spouse may have shared? These currencies are in the end just strings of letters and numbers that look like this: 1F5tAaz5x1HUXrCTLbtMDqcw6o5GNn4xqX. If you see such strings, cryptocurrency could be involved.

There are two ways people most often hold cryptocurrencies. Either on the website where they buy it, or on an electronic wallet (which is really just a mini-computer the size of a thumb drive that securely records their currency id codes). You may find such an electronic wallet, but more likely you will see evidence of computer traffic with one of the virtual wallets on the web.

Keep an eye on Bitcoin. If the optimists are right, there could be millions of dollars of it to get if you can find it. The higher it goes, the greater the chance that the kinds of people who like to buy gold will have cryptocurrency too.

One of the most powerful tools a spouse had to monitor assets or other activities is to look at the shared computer of the spouse under investigation. We have written before in When You’re Allowed to Look Through Your Debtor’s Computers and Phones that as long as a person can show ownership of the computer, anything on that computer is probably fair game to look at, subject to some exceptions.

Hacker in old warehouse.

Sending the contents of what you find to the cloud (a remote server controlled by someone else) is another question. A new case in the Sixth Circuit this month held that software that monitors keystrokes and content amounts to illegal wiretapping under both federal and Ohio statutes. You can read the case, Luis v. Zang here.

This case involved a technology called WebWatcher, which allows a person to monitor a computer’s activity. Where it got the company and the husband in trouble was that WebWatcher allows you to look at the material in nearly real time once the content of the computer activity is stored on the company’s server. The fact that WebWatcher appears captures the information contemporaneously is what turns this into wiretapping, the court held.

The critical distinction in wiretapping jurisprudence is between instantaneous access and access to information that’s stored. If all WebWatcher did was to store a record of the emails sent and received on the computer, that would not have been wiretapping.

The decision applies to the Sixth Circuit, although all the circuits agree that to have wiretapping you need contemporaneous capture of the information. Depending on the kind of software you use to log keystrokes and the transmission (if any) of that information, you could end up with what the Sixth Circuit calls wiretapping or just storage of information you have a right to see.

What’s certain is that it’s incumbent on any lawyer using such information to know how the program works. Just because it comes out of a small box you buy at a big box store doesn’t mean it will produce admissible evidence.

Want to know more?

  • Visit charlesgriffinllc.com and see our two blogs, The Ethical Investigator and the Divorce Asset Hunter;
  • Look at my book, The Art of Fact Investigation (available in free preview for Kindle at Amazon);
  • Watch me speak about Helping Lawyers with Fact Finding, here.

 

What’s wrong with using a forensic accountant in your hunt for a spouse’s hidden assets? Nothing, provided you hand that accountant all the pertinent information you can. We’ve mentioned the need for these professionals frequently on our site, and this Forbes article by Jeffrey Landers explains similar reasoning.forensic accountant divorce

The problem with forensic accountants can be timing. We are often brought into an asset search after a forensic accountant has been hired. The accountant has the sense that something is amiss but beyond being able to testify that the numbers don’t add up, things are at a standstill and the pressure to settle continues to mount.

Our firm is not made up of accountants, and we are not able to testify that the books and records of eight companies controlled by Husband are probably not reflecting all income generated.

But where we can offer help is to find entire new companies that Wife and her accountants (forensic included) did not know existed.

How can this happen? For the simple reason that forensic accounts are trained to look at what is in front of them and to decide if it makes sense. They can tell if money has been stolen, but are on less firm ground in deciding where that money went. What did it buy? Where might it be sitting today?

Our strength is in taking a fresh look at a person and trying to find everything he owns.

If our client tells us not to bother looking for assets outside a person’s state of residence, we look anyway. If our client tells us about a piece of property that was sold last year, we make sure it really was sold. If it was, we try to see who bought it, because it could be that Husband sold it to a company he, a friend or relative controls.

So by all means, hire a forensic accountant if you need one. Just remember to make sure an investigator with a wide scope has taken a look. No point in examining “all books and records” when there could be millions stashed in a company you know nothing about.

Want to know more?

  • Visit charlesgriffinllc.com and see our two blogs, The Ethical Investigator and the Divorce Asset Hunter;
  • Look at my book, The Art of Fact Investigation (available in free preview for Kindle at Amazon);
  • Watch me speak about Helping Lawyers with Fact Finding, here.

The debate so far over whether Apple should help the U.S. government execute a warrant to see what is on one of its phones has focused on the information of a dead terrorist and the prospective data breach (according to Apple) of millions of law abiding citizens.

The stakes are high, but lost in the discussion is the future of data retrieval to fight another kind of wrongdoing: deadbeat parents who won’t pay child support or greedy spouses who hide assets during and after divorce.prenups if apple wins

We spend a lot of time looking for such assets, and while we have generated lots of good leads, nailing the case often requires the production of bank accounts.

Imagine this: Husband handles all the finances of his businesses and gives Wife an allowance to run the home, pay the school fees and taxes. When Husband decides to end the marriage, he begins to divert cash taken out of the business to bank accounts held in the names of limited liability companies he has set up around the country. Some of the accounts are in Caribbean tax havens.

The court orders Husband to produce all financial records. He does, but they seem “light.” Husband is ordered to produce his phone as evidence, since some of his banking may be paperless. He hands over the phone but not the password. “If a dead terrorist has rights, so have I,” he proclaims.

Recall that Apple co-operated with law enforcement in handing over everything the terrorist had backed up on the i-cloud. It was just the material not backed up that Apple decided it should not have to help uncover.

What should wives like the woman in our example do to protect themselves against super-encrypted, paperless financial records available for the price of a smartphone?

One idea we had in our office was this: draft a prenuptial agreement that shifts financial burdens in the event that the entire contents of the phone are not backed up once a week. In the event of a divorce, once Husband can be shown to have stopped uploading the records to the cloud, he automatically surrenders his share of tangible assets the wife can find: homes, cars, shares of businesses.

Some states may frown on such an approach, but we will have to figure something out if millions of us (in a world in which Apple prevails) can go dark as to our financial records at the drop of a hat.

Side note: would we back Apple if the facts and company involved were a little different? What if Goldman Sachs built a super-secure bank vault miles underground in the desert? Hedge fund billionaires and Russian oligarchs use the vault to keep records that could prove tax evasion, insider trading, market rigging and a host of other financial crimes. The vault is booby-trapped to explode if anyone tries to break into it. Even if you get past that system, each individual box is rigged so that if anyone dries to drill into it, acid is released and destroys the contents.

When presented with a court order to open the vault, Goldman says, “No. If we break into one bad guy’s vault, the secret of how to disable it would leak out and someone else could break in. Our customers find this offensive.”