Business & Divorce
Does Bitcoin Need to Be Disclosed in a Divorce?

Does Bitcoin Need to Be Disclosed in a Divorce?

September 17, 2020

In this case, filed on August 10 but certified for publication August 27 at the request of ACFLS, the First District affirmed a San Francisco trial court’s post-judgment order finding that Husband breached his fiduciary duties to Wife in connection with nondisclosures relating to community cryptocurrency and bitcoin transfers and losses. It rejected his arguments that his nondisclosures were not “material” and that there was no evidence that his breaches impaired Wife’s interest in the assets.

On the first issue, the panel said:

“Francis asserts the evidence that Erica generally took no interest in the couple’s finances during or after their marriage proved that she would not have done anything to protect her interest in the bitcoin investments had he informed her about them. The trial court reasonably disagreed. Erica’s lack of involvement or interest in the couple’s finances before they separated is undisputed, but it sheds little if any light on what she would do to protect her financial interests after retaining divorce counsel, filing for divorce, and serving Francis with restraining orders that barred him from making unilateral decisions involving the community estate. Even Francis acknowledges in his reply brief the ‘general validity’ of Erica’s point that ‘[a] spouse who may be reliant on and trusting of the other during marriage, may well exercise independent judgment and rely on new advisors after separation.’ Indeed.”

The panel also emphasizes that the breach occurred when Husband initially engaged in the transactions without disclosure to Wife, not when later events rendered the community cryptocurrency “inaccessible and potentially worthless.”

On the second issue, Husband argued that some of the bitcoin investments resulted in large gains for the community and thus it was not “impaired” simply because the lost ones did not also result in a profit. The panel disagreed, concluding that “the financial success of one undisclosed investment does not erase the harm to the community estate, and Erica, occasioned by a separate undisclosed transaction.”

Read the court opinion in its entirety.


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