Cryptocurrencies and Asset Division: Legal Investigators at Work?
The evolution of technology profoundly influences how assets are divided in legal disputes, especially as certain individuals choose not to reveal their cryptocurrency holdings voluntarily. This situation has triggered the emergence of a unique field of expertise for legal investigators and private detectives.
Curious about the Crypto Hunters?
Those are specialized professionals possessing a unique set of technical skills and tools, enabling them to unearth hidden assets while remaining within the bounds of the law. Their role involves identifying wallets, dissecting transactions, and delving deep into the actions of the owners. Although their work spans across numerous areas, it's worth noting that over a quarter of their cases involve cryptocurrencies.
Crypto asset forensics, cryptocurrency forensics, and blockchain forensics have become a significant part of our practice and by far, the fastest growing part of our practice,
reveals Nick Himonidis, a renowned legal investigator from New York.
Nick explains that most investigations tend to be straightforward: liaising with centralized exchanges such as Coinbase and Kraken, or scrutinizing a handful of transfers from a personal wallet. Yet, there are instances when they have to seize computers, phones, and other devices housing relevant information or trace thousands of transactions across blockchains. Himonidis likens such complex cases to “whole enchiladas,” where situations engulf every facet of a specific field, demanding substantial time and financial commitment before the cryptocurrencies can come under judicial scrutiny.
Cases in Point: Real-life Investigations
As investigators constantly scour for various cryptocurrencies in hot and cold wallets, the ones that often present the most difficulties are the anonymous coins like Monero and Zcash. These currencies can cloak transaction details, rendering tracking virtually impossible. Interestingly, while many cases bear similar features, some individuals employ creative tactics in an attempt to conceal their assets from family members or legal institutions:
1. During a search, Nick Himonidis stumbled upon a MacBook concealing XMR tokens valued at $700,000. Intriguingly, these were not stashed in an application with a standard interface but were accessible exclusively through the command line interface.
2. Legal investigator Mark DiMichael once dealt with a spousal dispute over a Ledger cold wallet. In the heat of anger, the wife, oblivious to the password, seized the device. This action inadvertently locked both parties out of their assets and subsequently gave rise to legal issues.
3. In a high-profile divorce case in New York, a woman engaged a crypto hunter to track her husband's assets. Despite making over $3 million annually, he denied possessing any savings. After six months of relentless searching, the crypto hunter finally unearthed 12 BTC (equivalent to $500,000 at the time of discovery).
While specialists may have a firm grasp of this new field, it poses significant challenges to regular family law attorneys. Many have started showing interest in cryptocurrency matters, but the current legal documentation, designed to facilitate asset disclosure, is ill-equipped to handle these cases. This gap complicates the legal process, often necessitating the enlistment of extra experts.
What I find in litigation is because this is so new to all of us, even the most seasoned attorneys — unless you’re really going out of your way to study this — educating the court, knowing what to ask for, and finding the right experts, it’s much more of a scramble to me than other areas of law which had been around much longer
observes Kim Nutter, a seasoned family law attorney.
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