Statistics have shown that 1 in 2 marriages will ultimately end in separation or divorce. In the unfortunate event of a matrimonial dissolution, there are several financial issues that need to be addressed. These financial issues include (but are not necessarily limited to):

  • Calculating the income available for spousal and child support
  • Calculating equalization payments
  • Identifying potentially hidden assets
laptop-figure

Calculating Income

Calculating Income Available for Spousal and Child Support

When spouses separate, one of the most critical issues that must be determined is the amount of spousal and child support (if any) that must be paid to the other spouse.

There are several red flags or potential indicators which would suggest that a spouse may not be disclosing all of his or her income to be used in calculating spousal and child support payments, including:

  • An unusual reduction in revenue and an increase in expenses, particularly as compared to previous years
  • Handwritten adjustments on timesheets and timecards
  • Unsupported adjustments to payroll
  • An employee who claims maximum benefits each year
  • An employees whose stated and documented injuries are not consistent with pictures on social media
  • An employee who is the only one in his or her department that claims overtime during a slow period
  • Personal expenses that are known or are suspected to funnelled through the business
  • An unwillingness by the spouse to provide full financial disclosure to the other spouse
  • Several unusual year-end adjustments that lack documentation and can not be accounted for.

Calculating Equalization

Calculating Equalization Payments

In the event of a marital dissolution, in order to both spouses in the same financial position, the spouse with the higher total net assets must pay the spouse with the lower net total, which serves to ‘equalize’ the spouses—commonly referred to as an equalization payment. It would therefore, follow that both spouses would be incentivized to understate the value of their respective assets.

There are several red flags or potential indicators which would suggest that a spouse may not be disclosing all of his or her assets or not reporting the fair market value of such assets, to be used in calculating support payments, including:

  • Known offshore activity without representation of such assets on the sworn financial statements
  • Organization financial ratios that are not consistent with industry standards
  • An unwillingness by the spouse to provide full financial disclosure to the other spouse
  • A spouse providing redacted or seemingly altered financial records in response to disclosure requests

Identifying Potentially

Identifying Potentially Hidden Assets

Identifying hidden assets in a matrimonial dispute can challenging in the best of circumstances. Most people that hide assets from their spouses tend to do things ‘behind the scenes’ and in plain view of the other spouse.

There are several red flags or potential indicators which would suggest that a spouse may not be disclosing all of his or her assets includes:

  • Deposits in bank/investment accounts from unknown sources
  • Payments to credit cards/lines of credit that cannot be traced to any known bank accounts
  • Purchases of large assets whereby the source of funds is believed to be cash or cannot be traced to any known or disclosed accounts
  • Individuals who carry their financial affairs in overly complex financial structures, particularly in industries where such complex structures are not the norm

Matrimonial Crypto Case Study:

Like many matrimonial fraud schemes, Boaz never intended to conceal money from his wife Izzo. Of course, Boaz also never imagined that he would be getting a divorce. Their marriage had been on shaky ground for a prolonged period of time, and it was becoming evident to Boaz that a divorce was imminent.

Boaz concocted a scheme in order to hide and conceal money from his wife (and her lawyers) before the divorce proceedings commenced. He spent months researching all of the various ways he could accomplish this goal, while at the same time attempting to cover his tracks and leave as little of a footprint. He wanted to be sure that tracing his financial improprieties would be as difficult as possible.

Boaz considered: overpaying his credit cards; overpaying his lines of credit; overpaying the Canada Revenue Agency; and withdrawing small sums of cash over an extended period of time and subsequently hiding the money from Izzo. He also contemplated stashing funds in a family member or friend’s name, or moving assets and money overseas.

Finally, Boaz landed on Bitcoin, like so many others before him. This was a financial product that he had heard about for years, yet the underlying mechanics were quite unfamiliar to him. However, since Izzo was not tech savvy, he decided that he was going to hide his money by buying Bitcoin.

Boaz had no experience in cryptocurrency, and decided to research everything and anything about bitcoin. For example, how to purchase it, and where/how to store it. He performed countless internet searches, viewed YouTube videos on this topic, joined reddit and several discord crypto-related chat groups. He also downloaded different crypto-related applications onto his phone and bought the necessary cold storage hardware wallet in order to safely store the crypto asset (bitcoin) that he had decided to buy.

Boaz was now ready to start accumulating bitcoin and loading it onto his cold storage wallet. Naturally, Boaz did not want to keep all of this from Izzo, and so he purchased small amounts of bitcoin through his multiple credit cards. To further conceal his behaviour and to avoid arousing suspicion, he e-transferred funds directly from his personal bank account into applications where he could purchase bitcoin, located bitcoin ATM machines where he could purchase bitcoin directly and found individuals online who were anxious to meet him in person for peer-to-peer transactions.

Investigation Procedures:

  • Conducting interviews
  • Obtain and review banking records (including the time period during which the suspected concealment of assets occurred)
  • Acquire a forensic image of all electronic devices
  • Trace the movement of crypto assets on the Bitcoin Blockchain
  • Contact the appropriate exchanges and financial institutions

To determine whether you may be ‘leaving money on the table’ in connection with your pending matrimonial dispute, please take the following survey: