Divorced couples using crypto to hide cash in divorces KordaMentha warns

Troubled couples are increasingly turning to the murky world of cryptocurrencies to hide assets during divorce proceedings, one of Australia’s top forensic investigators warns.

Australians over the age of 50 have the largest cryptocurrency investments, with average holding valued at $56,200 or $7.6bn overall.

Troubled couples are increasingly turning to the murky world of cryptocurrencies to hide assets during divorce proceedings, one of Australia’s top forensic investigators warns.

KordaMentha, known primarily as an insolvency specialist, has found itself an unlikely player in family courts where its skills for uncovering secret stoushes are in demand.

Partner Brendan Read - a former detective from Queensland Police’s High Tech Crime Investigation Unit - said distressed business owners had used crypto as a way to hide manageable assets and now it was a trend in divorce proceedings.

More concerning, he said most lawyers didn’t have the skills to unearth stealthy digital cash piles, which can total tens of thousands of dollars.

“Going back to previous years with baby boomers, property settlements would form a large part of that (divorce) settlement,” Mr Read said.

“Now, if you look at Gen X, they’re moving into things like shares - in that sort of category - and now we’re moving into this next generation, with this class of asset being crypto.

“The challenges I see in this space are lawyers operating in the family law space, they are not across this type of asset as much as I would suggest they need to be. Because of that, there is that potential risk of a significant part of the asset pool being missed and sort of not identified correctly.”

KordaMentha partner Brendan Read says distressed business owners have used crypto as a way to hide manageable assets and now it is a trend in divorce proceedings.

Mr Read said the amounts being hidden were not small and “quite significant”. According to research firm Roy Morgan, more than one million Australians now hold cryptocurrencies such as Bitcoin, Ethereum, Ripple, Cardono and the Elon Musk-backed Dogecoin.

Australians over the age of 50 have the largest cryptocurrency investments, with average holding valued at $56,200 or $7.6bn overall.

“The other thing with crypto is it can be quite volatile,” Mr Read said.

“From the point of when parties separate to the point where the matter is finalised, the value of that asset can change considerably during that time. It can go both up and down. So that’s something that both parties need to be thinking about.”

“When we’re doing these financial-related investigations, the methodology that KordaMentha uses doesn’t change. We do funds tracing, it’s just with a different type of asset and there are different tools that we need to use to be able to do that.”

These methods include combing through a spouse’s web browser history, uncovering hidden files on a particular device that reveal funds being moved into crypto accounts.

But sometimes its hard to obtain the funds, as was the case when cryptocurrency fund DCA Capital collapsed last year. KordaMentha could only find $4900 of investor funds - which at one point totalled $86.5m - in bank accounts, saying most of the cash was tied up in a smart contract and could only be accessed by a digital key that they couldn’t locate.

In family law, failure to disclose or misrepresent assets in court can lead to hefty penalties and even imprisonment.

Despite these consequences, Mr Read predicted the problem would worsen.

“The largest age brackets that are taking up crypto are 18-24 and then 25-34. And when you look at the statistics of the breakdown (of marriages) and the age brackets where divorces are happening, we haven’t quite got there yet.

“We’re prior to the tidal wave of this sort of asset playing out. It’s concerning in terms of when you look at those statistics against the uptake of crypto that some of these age brackets probably haven’t even gone into a marriage yet, let alone sort of coming out.”

18-24 year olds have an average cryptocurrency holding of $2600 or $630m overall, according to Roy Morgan. This represents 3 per cent of Australia’s total crypto market.

The average holding leaps to $18,200 among 24-35 year olds or $7bn overall.

“Analysis by gender shows men’s average cryptocurrency investment of $23,400 is nearly twice as high as the average investment for women of $12,800,” Roy Morgan said.

“This large difference means men hold total cryptocurrency investments of $17.4bn (81 per cent of the market) compared to only $4.2bn (19 per cent) for women.”

Originally published as Divorced couples using crypto to hide cash in divorces KordaMentha warns