A CNBC report by MacKenzie Sigalos on May 20, 2023, revealed how financial deception involving cryptocurrency is taking new forms. During their divorce, a woman in New York named Sarita (a pseudonym) discovered her spouse’s concealed Bitcoin investment, amounting to $500,000.
Despite her husband’s $3 million yearly income, Sarita noticed a scarcity of assets being disclosed. Her suspicions led her to hire a forensic accountant, who subsequently discovered 12 bitcoins stashed away in a crypto wallet her spouse had hidden.
According to an NBC News poll cited in the CNBC report, cryptocurrency investment and usage are rising, with a fifth of Americans engaged in crypto transactions. Men between 18 to 49 years are the main demographic involved.
The CNBC report also brought attention to the challenges lawyers and courts face in keeping up with the rapid development and complexity of the cryptocurrency world. Kim Nutter, a Florida-based attorney specializing in family and marital law, discussed the difficulties in dealing with crypto assets during legal proceedings. She noted that the law is still catching up with this novel form of currency.
Echoing Nutter’s sentiments, Kelly Burris, a divorce attorney from Texas, highlighted the difficulty of tracing hidden crypto-assets due to the lack of a centralized authority that can be subpoenaed for crypto-related information.
A new breed of forensic investigators, dubbed “crypto hunters,” has emerged to navigate these murky waters. One such investigator, Nick Himonidis, reported to CNBC that cryptocurrency forensics has become a significant and rapidly growing part of his New York-based practice.
Crypto investigator Nick Himonidis, a licensed private investigator and computer forensic expert, shared with CNBC that a quarter of his divorce-related cases involve elements of cryptocurrency. In some of these situations, the cryptocurrency, such as Bitcoin, is a straightforward custodial asset managed through a brokerage account or a trading platform like Coinbase, which maintains meticulous records akin to traditional brokers like Morgan Stanley.
However, other cases are more complex, described by Himonidis as the “whole enchilada.” In these instances, clients call on Himonidis to serve as the neutral forensic cryptocurrency expert tasked with managing, accounting for, and tracing undisclosed crypto assets that one party may possess.
When Himonidis began tracking crypto assets, Bitcoin, Ethereum, and a few other coins were the main focus. Today, according to CoinMarketCap data cited in the CNBC report, there are more than 24,000 cryptocurrencies, boasting a market cap of $1.1 trillion. These coins exist on numerous independent blockchains, adding layers of complexity to Himonidis’s work.
Another challenge is the rise of privacy tokens – cryptocurrencies specifically designed for anonymous transactions. Coins like Monero, Dash, and Zcash operate on unique blockchains, effectively masking transaction details, including sender and recipient identities and transaction amounts. Tracking and de-anonymizing transactions in these cryptocurrencies, such as Monero, is “virtually impossible,” Himonidis told CNBC.
In one instance, Himonidis managed to unearth around $700,000 worth of Monero on a MacBook discovered during the legal proceedings. The cryptocurrency was stored in a command line wallet, a software wallet not easily accessible via conventional means on a Mac. This required specialized technical skills to access.