Single Joint Expert: A Model for Dealing with Cryptocurrency in Divorce

by | Oct 7, 2022 | divorce, expert witness

Investigations involving cryptocurrency-related cybercrime matters and expert witness work in cryptocurrency cases have historically been the most frequent types of cases that CipherBlade has been engaged on. But engagements on cryptocurrency-related divorce matters have been an increasingly common niche that CipherBlade has been engaged on, having been involved in approximately 120 divorce-related cases to date either in a consulting, investigative, or expert capacity.

Most of the time, they have involved an engagement from an individual ‘Party A’ going through a divorce (or an attorney on their behalf) that does not have detailed (or even basic) knowledge of cryptocurrency assets that are controlled by their spouse ‘Party B.’ Usually, Party A doesn’t know ‘where’ cryptocurrency is allegedly being stored or held. Usually, they have little to no access to appropriate records or statements. And usually, they have little to no general knowledge about cryptocurrency themselves.

In some cases, it involves ‘Party A’ making accusatory remarks suggesting that they believe their spouse is attempting to hide or conceal assets in the form of cryptocurrency, and often a significant amount of it (hundreds of thousands of dollars, sometimes millions of dollars worth of cryptocurrency). 

But in other cases, the individual has no reason to believe their spouse is being deceitful but wants some ‘transparency’ or wants someone to independently review and assess the situation to make sure everything is properly accounted for.

Traditional Expert Model & Process

In most divorce cases CipherBlade is engaged on, the party seeking to engage us is usually the one that doesn’t hold cryptocurrency assets’ Party A’ and may have very little (or nothing) in the way of records and documentation of such cryptocurrency assets, accounts, and wallets. Usually, their spouse has exclusive access and knowledge of cryptocurrency holdings.

Usually, ‘Party A’ wants to hire us during the discovery process. This is often because they realize they don’t have the knowledge and expertise to deal with this early on, or once initial discovery documentation comes in, they can’t make any sense of it. In other cases, little to no disclosures related to cryptocurrency are provided at all, and they may not even know what, exactly, to ask for.

For these reasons, in virtually all divorce matters, the first thing CipherBlade does is get an understanding of the situation, review what has been disclosed (if anything), and provide pertinent advice on what should be disclosed and how. If the spouse owns cryptocurrency assets, there are almost certainly going to be some issues with disclosures even when ‘Party B’ is making a genuine best effort to disclose such assets and records.

We say this from experience since, in all the cryptocurrency divorce investigations we’ve done thus far, there has not yet been a single case yet where the disclosures provided from the outset were sufficient to the effect that it would have allowed us to independently confirm and verify the accuracy of all reported cryptocurrency holdings. 

There is almost certainly going to be some additional documentation and details needed as part of the disclosure process, and the disclosure process can take time to play out. Optimistically, a couple of months for the cryptocurrency alone. But the process can drag out much longer if there are challenges in obtaining the necessary disclosure information and documentation to perform a comprehensive analysis.

Many of the divorce cases that CipherBlade has been engaged on have gone relatively smoothly or in an acquiescent manner. But some have undoubtedly been much more contentious.

The reality is that under the traditional model, the process can take considerably longer and be much more expensive for both parties than it would be under the Single Joint Expert model. This is due to the considerable amount of additional arguments, back and forth between all the parties, the motions filed by attorneys for both sides, and occasionally subpoenas. 

Requests being made by CipherBlade typically towards Party B can also be lost in legalese translation; for example, it’s not uncommon for opposing counsel to object and suggest that ‘passwords’ and ‘private keys’ are being requested even though we never suggest providing this in a divorce matter. The accusations ultimately stem from not having a concrete idea of what, exactly, is being requested and what something like a ‘private key’ technically is.

All this can end up dragging out the process and adding unnecessary costs for both sides, which are made worse if a party is less than cooperative, or even obstructive in some cases.

Some common arguments that are put forward when one of the parties is less than cooperative might include:

  1. Claiming documentation or records simply can’t be obtained (almost never true)
  2. Claiming adequate documentation or records have already been provided.
  3. Claiming records and documentation that have been requested have already been provided (even when this is not true).
  4. Continuing to file motions or objections, saying that providing such records (such as a statement from an exchange) would be ‘overly burdensome.’
  5. Making allegations that providing (public) addresses or public wallet information would compromise the security of the wallet (which isn’t true of course)
  6. Twisting words that have been said and subsequently attacking a ‘straw man.’

Once there is adequate or more reasonable disclosure, it puts CipherBlade in a much better position to more comprehensively assess cryptocurrency activity and assets in question and provide a report detailing our analysis or assessment if requested.

The Single Joint Expert Model

The Single Joint Expert (SJE) Model in a divorce matter involving cryptocurrency involves an expert acting jointly for both parties instead of just one party. This means that the opposing side would not need to hire an opposing expert, although it should be noted that even under the traditional model, it’s not overly common for the other side to have an opposing expert anyway in divorce cases in our experience.

Why the Single Joint Expert Model can be a Better or Worse Option

There are a few core advantages and disadvantages of having a Single Joint Expert in divorce cases.

Advantages of the SJE Model in Divorce Cases Involving Cryptocurrency

  1. It’s faster since relevant information is communicated to and received from both sides.
  2. It’s less expensive for both parties, particularly with regard to legal fees.
  3. The process is smoother and less likely to result in tension or disagreement among the parties.
  4. Both sides can ask questions more readily to the expert since they are an expert for both sides.

Disadvantages of the SJE Model in Divorce Cases Involving Cryptocurrency

  1. Since the party represents both sides, the SJE will not be in a position to offer strategic advisory that would be beneficial to any one side.
  2. Sometimes, one or both sides won’t understand enough about cryptocurrency and the matter at hand from a technical perspective to know what questions they should be asking the expert to begin with, which could put them at a disadvantage.
  3. In cases where an SJE is hired after instructions and the scope of work have been drafted and agreed upon by both sides, those instructions may be problematic, flawed, misinformed, or heavily influenced by one of the two sides so as to make an expert engagement ineffective or even useless. If, however, the joint engagement is more open-ended such that the instructions are agreed upon during the course of the engagement or if one side has not sought to carefully influence the instructions outlined in the scope of work, there are generally no issues in this regard.
  4. A competent expert might not be appointed as the SJE. Since both sides need to typically put forward a candidate or candidate(s) as their preferred SJE, if one side wanted to manipulate the situation for their benefit, they could put forward a ‘faux expert‘ who might claim to be an expert in such cases, but in reality, may not be sufficiently qualified or knowledgeable. E.g., The vast majority of traditional forensic CPAs would fit this criterion, even if they claim to have ‘cryptocurrency knowledge and experience.’

Situations Where a Single Joint Expert Model Won’t Work

There are some situations where an SJE simply won’t work or is ill-advised. If the matter is highly adversarial or if there’s reason to believe that one side may try to be obstructive or manipulative for their own benefit, then opting for the SJE model is usually ill-advised in our opinion.

The model works much better when parties are cooperative and genuinely want to resolve the situation quickly and efficiently. This is not always the case — as some attorneys that have experience in family law cases can attest to, one ‘strategy’ that the wealthier party can use is to ‘drain’ the financial resources of the less wealthy party, so they are forced to forget about it and move it or to settle the matter on less than favourable terms.

Additionally, since Party B generally knows a lot more about cryptocurrency from a technical perspective than Party A, there are situations where Party A might want to hire their own expert because they ‘don’t know what they don’t know’ and might want strategic technical advice on the situation, or might want to know if allegations being made (either by Party A, Party B, or both) are true, false, or somewhere in between.

Note: Nothing in this article is to be construed as legal advice or legal opinion.