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California Court Issues Ruling Regarding Bitcoin Transactions in Divorce Cases

Recent changes in technology and currency have not only altered the global economy, but they have also modified settlements and property division in divorce cases. This was demonstrated in a recent California case in which the court found that the husband violated the fiduciary duty he owed his wife as well as her interest in the community estate by failing to disclose information regarding his cryptocurrency investments. If you are in the process of determining whether to end your marriage, it is important to understand how the investments you and your spouse own may be evaluated, and you should consult a knowledgeable California divorce attorney regarding your rights.

Facts of the case

It is reported that in January 2013, the wife filed a petition for divorce and, along with the petition, served her husband with a restraining order that prohibited him from transferring, concealing, or disposing of any property, whether community or separate. In April 2013, the husband made three bitcoin-related transactions. Ultimately, most of his $45,000 were tied up in a bankruptcy action. He eventually recovered a small amount, and in his financial disclosures in February 2014, disclosed ownership of 1,062 bitcoins.

Allegedly, the court found the bitcoins to be community property and divided them equally between the spouses. Only after the wife sought to collect her half of the bitcoins was it disclosed that the remaining coins were tied up in bankruptcy. The value of the bitcoins had increased greatly at that time, and the original investment of $45,000 was now worth $8 million. The wife filed a motion to have half of the value of the bitcoins transferred to her and to grant her attorneys’ fees. The court granted the motion, finding that the husband breached the fiduciary duty he owed his wife. The husband then appealed.

Fiduciary Duty Between Spouses  

Under California law, there is a confidential, fiduciary relationship between spouses that imposes the highest duty of good faith and fair dealing on each party. Further, each spouse must act in accordance with the general rules regarding fiduciary relationships with respect to the management and control of community assets until the assets are assessed and divided by the courts.

The duty imposed includes the duty to fully disclose any material facts regarding community property or the value of assets and continues after the parties have separated. Thus, if a spouse breaches the duty owed and the breach results in an impairment to the other spouse’s interest in the community estate, which includes making a transaction that will cause a detrimental impact, the second spouse can assert a claim against the first spouse and may be awarded fifty percent of the value of the asset involved in the transaction. In the subject case, the court was not persuaded by the husband’s argument that his failure to disclose the initial bitcoin transaction was not material and did not impair his wife’s interest in the community property. Thus, the trial court ruling was affirmed.

Consult an Experienced California Attorney

It is critical for spouses to make full and accurate disclosure of their assets when they are getting a divorce, as the failure to do so can greatly impact the other party’s rights. If you are contemplating ending your marriage, California divorce attorney Ethan M. Weisinger can help you seek a fair assessment of community property and a rightful division of assets. Mr. Weisinger can be contacted through the form online or at 925-258-2020 to schedule a meeting.

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