Cryptocurrency in a Colorado Divorce with Anthony A. Garcia | Episode 126

Dividing assets in a divorce can be tricky, but what happens when you have cryptocurrency thrown in the mix? Anthony A. Garcia, an experienced cryptocurrency lawyer and investor, is here to unpack this complicated and lucrative investment opportunity. Anthony breaks down cryptocurrency into manageable definitions, concepts, and processes to simplify our understanding of this ever-changing field. How do you divide it fairly between divorcees? 

Is there a way to find out if your partner is hiding cryptocurrency? We hear Anthony’s predictions, how to stay on top of your cryptocurrency wallets, and the risks of identifying and calculating the value of cryptocurrency. Tune in for cryptocurrency consulting advice for both divorcees and lawyers!

Key Points From This Episode:

• What is cryptocurrency?
• Distinguishing between blockchain and cryptocurrency.
• Two tricky aspects of investing in cryptocurrency.
• The difference between your public address, cold wallet, and public key.
• Anthony’s prediction for cryptocurrency.
• The esoteric question: what is money?
• The appeal of Bitcoin.
• Why the anonymity of cryptocurrency is risky in a divorce.
• Why an asymmetrical understanding of cryptocurrency can affect a divorce.
• The lack of divorce laws relating to cryptocurrency.
• How to catch someone who did not disclose their cryptocurrency as a divisible asset.
• Why the changing value of cryptocurrency may be an issue in divorce.
• Anthony's advice for lawyers with clients that have cryptocurrency. 

What is Divorce at Altitude?

Ryan Kalamaya and Amy Goscha provide tips and recommendations on issues related to divorce, separation, and co-parenting in Colorado. Ryan and Amy are the founding partners of an innovative and ambitious law firm, Kalamaya | Goscha, that pushes the boundaries to discover new frontiers in family law, personal injuries, and criminal defense in Colorado.

To subscribe to Divorce at Altitude, click here and select your favorite podcast player. To subscribe to Kalamaya | Goscha's YouTube channel where many of the episodes will be posted as videos, click here. If you have additional questions or would like to speak to one of our attorneys, give us a call at 970-429-5784 or email us at info@kalamaya.law.

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DISCLAIMER: THE COMMENTARY AND OPINIONS ON THIS PODCAST IS FOR ENTERTAINMENT AND INFORMATIONAL PURPOSES AND NOT FOR THE PURPOSE OF PROVIDING LEGAL ADVICE. CONTACT AN ATTORNEY IN YOUR STATE OR AREA TO OBTAIN LEGAL ADVICE ON ANY OF THESE ISSUES.

Transcript

Ryan Kalamaya (3s):
Hey everyone. I'm Ryan Kalamaya.

Amy Goscha (6s):
And I'm Amy Goscha.

Ryan Kalamaya (8s):
Welcome to the Divorce at Altitude A Podcast on Colorado. Family Law.

Amy Goscha (13s):
Divorce is not easy. It really sucks. Trust me I. Know. Besides being an experienced divorce attorney, I'm also a Divorce client.

Ryan Kalamaya (20s):
Whether, you are someone considering divorce or a fellow family law attorney. Listen in for weekly tips and insight into topics related to Divorce Co Parenting and Separation in Colorado Welcome. Back to another episode of Divorce at Altitude. This is Ryan Kalamaya. This week we're going to get into something that I have been looking for to discussing for quite some time and it's Cryptocurrency and how Cryptocurrency can be involved in a Divorce and what the various issues are. And we're fortunate to be joined by an expert attorney in Colorado who can walk us through Cryptocurrency.

Ryan Kalamaya (1m 4s):
And let me tell you a little bit about Anthony Garcia. He's Colorado in California, licensed attorney. He's a solo practitioner that focuses his practice on commercial and probate litigation. Anthony provides Cryptocurrency consulting for clients and other lawyers, people like me who may be encountering legal issues related to cryptocurrencies that are beyond their expertise or experience. He's an avid Cryptocurrency investor himself since 2017. And Anthony is well versed in the ever changing landscape of Cryptocurrency and blockchain, including the rapid growing areas of decentralized finance, decentralized autonomous organizations, and non fungible tokens.

Ryan Kalamaya (1m 50s):
Nfcs. So we're gonna talk about if Eric Wolf, our hypothetical Divorce client goes through Divorce and Cryptocurrency is involved. Either him or Melanie have Cryptocurrency, but without going on too long. Anthony, welcome to the show.

Anthony A. Garcia (2m 6s):
Hi, thank you so much. Glad to be here.

Ryan Kalamaya (2m 8s):
Yeah, like I said at the beginning, I've been really looking forward to having a guest on and talking about this subject. Before we started recording, we were talking about, you know, at the time I was really interested in it because it was all over the news cuz Cryptocurrency had just been going to the moon, but with the market as the, at the time of this recording is really soured. So you know, people see Cryptocurrency in the news, but once you start us off for Listeners that don't understand what Cryptocurrency is, can you tell us a little bit on like a macro level, What is cryptocurrency, So that we can have a general understanding of what it it is as an asset itself,

Anthony A. Garcia (2m 49s):
Right? Cryptocurrency, if you think about it as perhaps a distributed ledger, and when I say that to people, I know, that's kind of like technical speak, but the way I explain it is imagine if you have just a regular accounting ledger, the same kind people have used for decades, but you hand it off to everyone who participates in a particular blockchain or Cryptocurrency network and everyone has real time access to this ledger. At the same time, every time there's a transaction, it's updated for everyone. And what that allows is essentially everyone to trust that what is on this network or ledger is exactly what it means to be or purports to be really.

Anthony A. Garcia (3m 37s):
And so what that means is that you can be certain that a transaction that occurs on this blockchain network as as we'll call it, has actually occurred. And contrary to what some people who don't really understand what it means, there's no physical asset of any kind. There's nothing that you can touch with your hands. The most popular Cryptocurrency is called Bitcoin. There's no actual coin. And it's something I actually struggle to explain to my parents who don't understand this stuff. It's an asset that lives entirely upon the internet. Now the underlying technology, it's, it's important to distinguish it between some of the terms that we'll be talking about.

Anthony A. Garcia (4m 18s):
Blockchain is what people might have heard. That refers to the underlying technology itself. This distributed ledger system that I've been talking about. Cryptocurrency is an application of the blockchain technology to finance or to money. There's many different kinds out there that your Listeners have probably heard of. Bitcoin being the most popular. There's also Ethereum, x R P, Carano, the list goes on, they're always in the news really. And each of those are considered their own networks. So if you want to own quote unquote Bitcoin, you have to be a participant in the network and that gives you access to the ledger basically.

Anthony A. Garcia (5m 3s):
Now the components that I think are really important for your Listeners to understand really is that there's two aspects of this that can be tricky. When you are a participant on a blockchain or in a Cryptocurrency, you have what's called a public address and a private key, the way that I explain it to my clients is if you think about the public address being the location of your bank, you can type it into Google Maps. Hey there's a Wells Fargo here, that's where you can send me my money. A private key is essentially your access to your bank account. So if you think about it like a security safety deposit box or something, whoever holds that key can access the account.

Anthony A. Garcia (5m 49s):
So what's critically important whenever we're talking about cryptocurrencies or blockchain in general is keeping control and security of the private key away from anyone who shouldn't have it. Because once that's disclosed it's totally gone. And I have explained this concept of the private key in a seminar that I hosted for a cle, but if we can just delve into it a little bit more briefly, it's really just a complex cryptographic passcode. It's a string of, I think it's like 24 or 48 different numbers and letter combinations. That's extremely difficult for anyone to hack in an ordinary sense.

Anthony A. Garcia (6m 30s):
So when I say crypto private key, I'm talking about a a basically a really long passcode. Now when we're dealing with crypto assets, a lot of times these are held in what are called wallets and there's really two different kinds of wallets. There's a hot wallet or a cold wallet. A hot wallet basically just means that it's a wallet that is being held on the internet. It has access to the internet. That could be your ordinary Cryptocurrency exchange which would store your assets for you or your own wallet that is being contained in a like a, a web address perhaps. And there, there are ways to really access that.

Anthony A. Garcia (7m 13s):
But the other side of the coin, which is where things can get a bit dicey, is the cold wallet. A cold wallet means a wallet that has no access to the internet. It's a physical hardware device. It looks almost like a USB flash drive. There's other ones out there that have different styles. But the main thing that the cold wallet allows is for complete safety and security of the private key So. That private key, the really long passcode is kept inside that, that little thumb drive and you have to have the thumb drive in order to, to sign or to have transactions take place.

Anthony A. Garcia (7m 54s):
So if someone who is dealing with crypto has their private keys for their wallet on a cold wallet, you really need to have physical control of that, of that piece of hardware.

Ryan Kalamaya (8m 4s):
Well and Anthony, we're gonna talk about some of the issues that come up with a Divorce cuz I can very much envision as a Divorce lawyer, Eric Wolf having like a cold wallet that he doesn't disclose or a crypto that does. He has disclosed just, but I wanna make sure that Listeners can fully understand And I have a couple questions for you or, or or comments. So is the cold wallet that usb, that thumb drive? Is that, you know, everyone's heard these stories about people losing Bitcoin and you know, one that stood out from that I remember is you know, some guy in England, I used to live in England who had thrown it away and it was millions of dollars or pounds worth of Bitcoin that got tossed and then he was sifting through the landfill looking for his USB drive or thumb drive.

Ryan Kalamaya (8m 53s):
Is that because he was looking for his cold wallet?

Anthony A. Garcia (8m 56s):
That's right. He probably had his private keys stored somewhere on his computer and that was the only way to access his account. And going back to this public address situation, you can, he probably saw the millions of dollars worth of Bitcoin available at his public address, but without those private keys he could not access it. And there's numerous stories of that out there, right?

Ryan Kalamaya (9m 19s):
Yeah, right. Well got it. Well, so, and then to make sure that Listeners can fully understand it, so is the difference I know that there's, but an overly simplistic way maybe of looking at it is that Ethereum is like a Euro or a British pound and Bitcoin is like a dollar. The, the currency is the denomination of what it is is that is maybe a Distinguishing feature. But blockchain and as far as I understand it, like you go to Wells Fargo and one of the benefits of Wells Fargo or Alpine Bank or First Bank, they carry the ledger so they keep track of your ledger, but the blockchain is available to everyone.

Ryan Kalamaya (10m 2s):
And if you Anthony say Ryan, I'd like to you know, sell you my car, I can know and build it in in, in different cryptocurrencies like Ethereum, we could have a condition that if you deliver the car to me that it will be, the money will be transferred to you and that I know that you have the money. Is that accurate?

Anthony A. Garcia (10m 26s):
It's a little bit more nuance than that. Blockchain is really the underlying technology of just having these distributed ledgers so to speak. What you are sort of referencing would be a smart contract where it's essentially self-executing code that is programmed onto the blockchain. Not all cryptocurrencies can do that. Ethereum was really one of the first ones that could do that. And you do hear it referenced as a smart contract functionality. That is where I do believe the Cryptocurrency trend is going because allowing blockchain technology to integrate basically code or programmable code that's really allows a lot more functionality.

Anthony A. Garcia (11m 11s):
It's really the basis for something called decentralized finance, which is basically borrowing and lending without really any intermediaries. It's peer-to-peer lending essentially. It also allows for what are called decentralized autonomous organizations, which you might have heard about. They're becoming a little bit more popular that referred to as Dows. They're essentially self operating companies that are run wholly on code. And it's, some of these issues are things that the law has never seen before. No one really knows how to classify a decentralized autonomous organization or really how to treat decentralized finance.

Anthony A. Garcia (11m 54s):
And something that's also been in the news recently is C BDCs also called Central Bank digital currencies. The United States government as well as other countries across the world are starting to develop their own CBCs, which is their form of electronic programmable money. So yeah, this is definitely an area where what you're referencing smart contract is, is going to be a major part of blockchain and Cryptocurrency in the future.

Ryan Kalamaya (12m 23s):
This whole discussion raises the issue and it's fairly esoteric is what is money And I mean money in and of itself. Like when I give you a dollar bill, I mean at this point money, I mean I generally don't carry cash and it's just numbers on the bank account, but it's something that we believe in and we've not always believed in it. But the history of money is fascinating. It's more for a future discussion. But when people in a Divorce get really upset about money, you know, some people can say, listen, it is only money and and ultimately it's something that we have convinced ourselves is important. And you know, now we're looking at this transition from buying into the concept of a dollar and the Federal Reserve, which right now as we're recording this, we're dealing with interest rates and the access to money and the money supply in one of the appeals as far as, you know, I understand it of Cryptocurrency is that that decision is decentralized.

Ryan Kalamaya (13m 25s):
It's not one entity that's making the decision about what something is worth And they various benefits. You know, to that

Anthony A. Garcia (13m 34s):
You're exactly right. Each blockchain network or Cryptocurrency has within it, and this is getting really technical, but each network has its own set of rules or protocols. So for example, Bitcoin, there's a set finite amount of Bitcoin that will ever exist in its history or in its future. And what that allows is for scarcity, which is something that makes Cryptocurrency attractive to a lot of folks, especially in this day and age of, of high inflation. So as the Fed keeps messing around with the money supply and and turning on the printing press, I do think Cryptocurrency is gonna be turned to as a more secure and stable asset because of the fact that it has mathematical scarcity built into it.

Anthony A. Garcia (14m 21s):
And So that again, I think that's why I'm so excited about Cryptocurrency because you can really tell that this is going to be an asset that a lot of people are gonna think about in the future. And there's a lot of risks that come with that, particularly in the Divorce context because of all this anonymity that's built into it.

Ryan Kalamaya (14m 39s):
This episode is brought to you by our law firm, Kalamaya Goscha Amy And I describe our law firm as an innovative and ambitious trial team that pushes the boundaries to discover new frontiers in family law, personal injuries and criminal defense in Colorado. We currently have offices in Aspen, Glenwood Springs, Edwards Denver and Boulder. If you wanna find out more, visit our website Kalamaya dot law now back to the show. Yeah, so Anthony, tell me about how cryptocurrencies can become an issue in Divorce proceedings. So if Eric and Melanie Wolf go through a Divorce, how could Cryptocurrency become an issue in that Divorce?

Anthony A. Garcia (15m 26s):
Right. Well I think one of the main issues that it can cause is if there's an asymmetry of understanding about what's going on with the cryptocurrencies. For example, if, if one of your hypothetical spouses is really in charge of the money in their relationship, for example, that person might be buying cryptocurrencies or getting invested in those and not really explaining to their partner or spouse how or what's going on. And so when the Divorce happens, it's really incumbent upon the spouse who was really not involved in the finances to one understand whether or not they even have cryptocurrencies.

Anthony A. Garcia (16m 6s):
For example, a spouse that is particularly adept with cryptocurrencies can hide this stuff and you might not even know if your spouse has purchased cryptocurrencies. And some of these things could be of considerable value, especially if there's been a lot of appreciation that's occurred. And the other aspect of this is really if you don't know what's how to handle cryptocurrencies, you're really putting yourself at risk. Even if you do receive some from your spouse, I mean there's always a risk of losing those private keys. And once you lose the private key, all of that money is either gone completely or it's open to theft.

Anthony A. Garcia (16m 47s):
And once it's been stolen, it's really hard to trace that back to a particular scammer or a fraudster are really a thief. And once you've lost the private keys completely, I mean that's it. Forget it, there's no, not even the FBI or the NSA can help you get those cryptocurrencies back. So those are the really the two main areas that I would suggest are of interest to people that are thinking about Divorce or or going through a Divorce is one, knowing whether there are cryptocurrencies at issue in the first place, if a spouse has been pretty clandestine or secretive with how they handle those assets. And two, how do you deal with the distribution or separating those things.

Anthony A. Garcia (17m 29s):
And actually a little bit lesser known or less thought of aspect of it would be the tax implications. These are still technically considered assets for IRS PURPOSES. So you do have to claim any appreciation as income if they're distributed. Would this be considered a taxable event if it's distributed in a Divorce setting? You know, these are all sort of interesting questions that although they might have solid precedent in sort of the ordinary asset class understandings, it it might not be so for crypto and there is no unified regulatory scheme in the United States for Cryptocurrency at the moment.

Anthony A. Garcia (18m 12s):
We're sort of running around.

Ryan Kalamaya (18m 14s):
Yeah and Anthony, I mean that raises certainly, I mean it's something I have thought about. So if Eric Wolf has Bitcoin and he's got, you know, a private, a cold wallet with private keys, you know, certainly he's incentivized to and may be tempted not to disclose that and Melanie may have a very difficult time tracking that down. I mean we've seen these news reports that my wife grew up in Boulder and she went to high school welfare, Fairview And. They were these guys that she was, she went to high school with who, you know, they were buying islands, they were basically embezzling a ton of money and it was all through Bitcoin And. We, everyone has seen these stories cuz you know, some of the shadow industries drugs, some other various aspects that, you know, sometimes you see where people are working in secret and Divorce that can come up.

Ryan Kalamaya (19m 6s):
And so there's a real issue if Eric is not gonna disclose that Bitcoin. But then you get into how much is it worth? And the one of the challenges that I have thought about is that these cryptocurrencies, the value can fluctuate dramatically. So it can be worth, you know, two x one day and that gives some real issues in a Divorce, which you can mitigate that where Erica Melanie could split, you know, the Cryptocurrency in half and then that you know, mitigates any sort of risk on one person getting a better deal than the other. But then it kind of raises your other issue is what does Melanie, does she even know what to do with the Cryptocurrency?

Ryan Kalamaya (19m 51s):
Is she, is it something that she can even, you know, handle or, or really knows how to address. But yeah the taxes, the liquidity and whether or not you can reduce it, you And, I were talking before we started recording And, they, I've had a couple divorces where their people have invested in Coinbase And, they've invested, you know, in 0.1 Bitcoin and it looks like a really nice interface where they put money in but then for them to get cash out is a real challenge. And so the tax implications and other things and you know, transferring a Divorce under 10 41 of the IRS tax code is not taxable event And I mean I'm not a tax attorney so I've gotta give the kind of, you know, disclaimer there.

Ryan Kalamaya (20m 37s):
But I mean Anthony, it's fascinating to address these cutting edge issues cuz you're right like the law, there's no case in Colorado that really addresses how do you value it, what's the appropriate way to, to handle Cryptocurrency. But we're gonna start seeing it more and more and for lawyers that don't know what to do with it, they're really doing their clients a disservice. So someone like you coming in and walking them through that those particular issues is a real benefit.

Anthony A. Garcia (21m 7s):
Yes. And one thing I'd also like to point out, it's And I think again, this stuff is super fascinating but with decentralized finance you're essentially lending out money and perhaps receiving a return and you might even be involved in what's called staking your cryptocurrencies and receiving a return on that. Now in the law it's not even clear whether or not that would be considered income. So if you have a significant amount of decentralized finance income or staking quote unquote income, does that play into the amount of alimony or child support that needs to be, you know, decided it's just some of these issues just need to be resolved. And, they case law just hasn't caught up to that yet,

Ryan Kalamaya (21m 49s):
Right? The mining of Bitcoin I know that people can mine Bitcoin and then they get additional Bitcoin. But is that income? You're absolutely right. I mean there's no case that has every day. It's not under the child support statute under under 14, 10, 1 15, you know, bonuses, trust, income, wages, it doesn't say mining Bitcoin and, and you know how that would shake out in court would be interesting but Anthony, how can you tell people, so like Eric, Wolf and Melanie, they go through Divorce. How could Melanie spot whether or not Eric has acquired Cryptocurrency? Is there a a way that her attorney or her could know if Eric hasn't said, Hey I just bought some Ethereum today.

Anthony A. Garcia (22m 36s):
Well if they don't just come out and say it, that can cause quite a bit of a problem because you will at some point either need to have access to that person's email address or phone or you'll need to get them into a deposition and testify under oath, which has its own set of problems. But really one of the ways that you would catch someone is on these on-ramps of trying to or off-ramps turning their cryptocurrencies back into cash. And that occurs that in exchange and there's a lot of regulated exchanges out there, finance Coinbase as you mentioned, there's really just a whole list of 'em. So if you can find out where Melanie's husband was able to at least conduct any sort of Cryptocurrency exchanges at all, either by searching through his email or going through his phone, if that's even a possibility, then you can start getting some traction and figuring out what exactly the assets are, perhaps what, how much there is and what the values are.

Anthony A. Garcia (23m 37s):
Now why I say that you need to have access to the phone or the email is because oftentimes to use some of these Cryptocurrency exchanges you have to establish what is called two factor authentication to even access your account. And that's just done as a matter of course because there's so much scamming that has gone on in the history of crypto that these cryptocurrencies exchanges require you to have two factor authentication. So what does that mean for the non tech savvy? That means that they're going to send you either an email or a text message or something like that to indicate that someone is trying to access your account and it'll say someone's trying to access your Coinbase account or someone's gonna access your finance account.

Anthony A. Garcia (24m 22s):
So that's just like a stealthy way to figure out sort of where the spouse is conducting their activities and really sort of catching them there. If you have access to the computer, you can look for certain applications that would be like a wallet or a portfolio. So for example, a really popular cold wallet application is called Ledger and it has its own application that you can access on the computer and it really is just looks like a portfolio. It says hey, you know, you have this many crypto stuff. So if you can find those things, that is very helpful if you can conduct that investigation. Otherwise, if you don't really have access to that stuff, it's kind of unfortunate.

Anthony A. Garcia (25m 3s):
But you would need to either engage the services of a heavy duty, what's called chain analysis expert that would go on there and and really conduct some, I mean some sort of proprietary system to deduce to a level of probability whether this person has cryptocurrencies. And that's a really complicated process or you can either have them testify at a deposition and, and the way that you would really do that is if this person's gonna lie, you are gonna have to have some knowledge of what is involved in a Cryptocurrency transaction to perhaps catch them in a lie in that situation.

Anthony A. Garcia (25m 44s):
So it's really hard to find out if you don't already know, but it is possible.

Ryan Kalamaya (25m 50s):
Yeah, and to I guess put more context to that. So if Eric and Melanie go through a Divorce, both of 'em under rule 16.2 have a duty of full transparency, candor and to disclose whether or not they own any assets including Cryptocurrency. And so there's one issue and that is if Eric puts on his sworn financial statement that he has Bitcoin or a Coinbase account and he provides the account number and puts T B D for the value, that's one thing. And then you know, the attorney Melanie could serve written discovery and ask for, you know, information related to that.

Ryan Kalamaya (26m 35s):
Certainly, I mean Amy, And, I are gonna have an episode where we talk about discovery cuz I think a lot of people and a lot of attorneys miss the availability of digital, the electronically stored information, the digital, so whether it be text messages or the applications information related to that, getting a phone or a laptop cloned or taking an image of that for analysis. But you know, that is, if you know about it then you can ask additional questions about it. But your real point, like the doomsday aspect of what you're saying is what happens if Eric does tries to hide it and he doesn't even disclose it, How can Melanie and her attorney go and make sure that he, you know, to find whatever he may be trying to hide And because it happens and you know, identifying those issues to make sure, and it might be looking at bank statements and seeing if there's bin or Coinbase withdrawals or whatever the case may be and and you know, looking at phones and seeing if there's application software applications, you know, the two step authentication by Google or somebody else and seeing is there an account here that might be helpful because you're right Anthony oftentimes Eric and Melanie, there'll be an asymmetry in the information and especially when it comes to Cryptocurrency, you And, I were talking before the, the show that your girlfriend just rolls her eyes or is just so sick of hearing about Cryptocurrency and that might happen where Melanie just tunes it out and doesn't even listen that Eric's investing a lot of money and doesn't realize until they go through a Divorce that this stuff could be really, really valuable.

Anthony A. Garcia (28m 18s):
Absolutely and one of the fears that I would have in the situation as well is what happens if they say I lost it or I don't have access to the private key anymore. I mean that's a real concern as well. I mean how, how do you test these statements? It's really difficult but one of the things that, and going back to one of the points you made is looking at the bank statements. The way that you transfer initial money onto an exchange is either by wire or by ach and most of the times it's by wire So that will definitely show up on there.

Ryan Kalamaya (28m 53s):
Oftentimes just so people understand Anthony is they are converting cash, US dollars oftentimes end to Cryptocurrency and then from there it's kind of an open season cuz they can go from Bitcoin to Ethereum or a whole host of different cryptocurrencies and if they invested, if they converted a hundred thousand dollars into Bitcoin five years ago, it's gonna be worth a different amount than a hundred thousand dollars. And whether it's now all of a sudden worthless or they claim it's worthless or it's worth, you know, $2 million, those are issues that we're, you're really gonna have to deal with in Divorce.

Ryan Kalamaya (29m 37s):
But you gotta first understand that it's even there to begin with with.

Anthony A. Garcia (29m 41s):
Right. And once you can get that toehold into where they're keeping their assets or even what is the public address of their wallet, your life then becomes a bit easier because I will remind you that all of this is, there's an associated public address. So you will be able to essentially track where the money is going to in terms of, it's not gonna say this money to Bitcoin has gone from Eric to someone else, but it will say this public address is sending to Bitcoin to this other public address. So then you can perform some additional investigation. So once you can get access to at least some basic information about the wallet or the exchange that you're gonna have some additional records that you can then use to sort of figure out what happened to the money.

Anthony A. Garcia (30m 32s):
And going back to the point of valuation, at least with these Cryptocurrency exchanges, they should be able to provide you historical records of how much Bitcoin was purchased at a particular price or on a particular day. Cuz a lot of times people, they won't just buy a large chunk of currency at one time, they'll, you know, they'll add a hundred dollars here, a thousand dollars here, whatever. So it, it's really helpful to see all of that information and you can get that from the exchanges.

Ryan Kalamaya (31m 0s):
Yeah, and to give people an idea, I, I went skiing with some guys who were living in Puerto Rico, they were Americans and you know, they were crypto bros. They had, you know, purportedly a billion dollars each in crypto And, they were going to Puerto Rico because they were no income taxes there. And so they were avoiding the taxes and if they went through a Divorce, certainly there might be some issues, but if they were to reduce hypothetically their billion dollars to you know, US dollars, there would be some tax consequences. So if Eric was a crypto billionaire then and Melanie wanted no part with, you know, his crypto then just wanted cold hard cash, there be some tax implications.

Ryan Kalamaya (31m 46s):
So Anthony finally, why don't we just wrap this up and talk about some of the difficulties and risks associated with identifying and accounting for Cryptocurrency that we haven't already covered. Because we've identified, you know, many issues. Are there any more that lawyers should understand in terms of security or other issues that may arise with Cryptocurrency in a Divorce in Colorado?

Anthony A. Garcia (32m 9s):
Absolutely and when I talk about this stuff, I usually gear it towards the lawyers because it's easy to forget that you can also as a lawyer get in trouble for handling this stuff because it's so easy to lose access to a wallet that could contain significant amounts of money for your clients. You know, if for example they entrust you with the private keys and you're the only one apparently that would have the private keys, if you lose those now you're exposing yourself to some sort of liability as a lawyer. So there's all of these different sort of best practices that I would suggest for lawyers in this space.

Anthony A. Garcia (32m 49s):
If you, if there are any listening right now, one would be to never personally agree to handle or to store your client's cryptocurrencies because there's always the risk that you will be looked upon with suspicion if those assets go missing somehow. And if you had ever come in contact with those keys, because I tend to reiterate this, anyone who has access to the private keys at any point, either by taking a picture of them, by having them, by recording it in a video and then freeze framing it, any of those sort of spy type ways of seeing the private key, that person now potentially could steal the cryptocurrencies.

Anthony A. Garcia (33m 34s):
So my advice to lawyers really is just don't handle those keys if you can help it, really just advise your clients on, on how to handle this stuff, but don't take it yourself. You just really wanna avoid any malpractice in that situation. And again, stressing the security aspect to your clients and making sure that they understand what exactly it is that they're keeping charge of because it's like you're your own bank now you are really in charge of your own security. So if you have a hundred thousand dollars of Bitcoin in your wallet and it's yours, no one can take that from you unless you are being really sloppy with the way that you handle your keys.

Anthony A. Garcia (34m 14s):
And in fact, there's many, many different articles about the FBI or other agencies being able to recover millions of dollars worth of stolen crypto. And a lot of times it has to do with the hackers themselves having sloppy private key access and the FBI is able to get ahold of it. So really making sure that you don't underestimate how much security is going to be involved with this because once you start advertising to anyone that you have cryptocurrencies or that you deal with that stuff, you really open yourself up to potential attack from other people. And I have a friend of mine specifically who's involved in the government and he is aware of all of these risks and he's the one who basically tells me like, don't even let 1% of your attention slip when it comes to dealing with this stuff.

Ryan Kalamaya (35m 5s):
I think that's really helpful for both, you know, clients like Eric who are going through a Divorce that, you know, if his attorney doesn't ask for the private keys or the other attorney, Melanie's attorney asks And, they don't realize what they're asking for, just really educating them. But Divorce attorneys, we deal with some really sensitive information with tax returns, with bank information. And this is just one element, I think it's helpful for attorneys and clients alike to understand the importance of security. It's something that we frequently talk about here on Divorce at Altitude, but And I think it's really important to highlight how important those issues are because you know, there needs to be full disclosure but that full disclosure might not.

Ryan Kalamaya (35m 56s):
It might, you know, you might not wanna actually get the keys to the kingdom cuz if you lose 'em then you could be on the hook and it, it might not be beneficial for anyone because if you know Russian hackers or somebody comes in and you know takes the Bitcoin, then neither Eric nor Melanie has it anymore. And that is something that it would be a risk that is avoidable.

Anthony A. Garcia (36m 19s):
That's exactly right. I advise some folks in probate law And I also tell them don't put your private keys in any public documents like a will that will one day be put into the record. Same thing with this. If there's some sort of decree that the parties agree to, like a, some sort of settlement, don't put the private keys in there. You know, keep that as a separate document if kept in a document form at all. So yeah, absolutely.

Ryan Kalamaya (36m 46s):
Well Anthony, if there are attorneys or Eric or Melanie Wolf, you know, they want to find out more about how you could help with advising them in a Cryptocurrency situation with a Divorce, what's the best place to reach out to you? And we'll have links to your bio and your phone number and the show notes for people. But for those just listening, how's the best way to to get in touch with you?

Anthony A. Garcia (37m 9s):
The best way would really be by email. You can email me directly at a Garcia a Garcia legal.com. Otherwise you can go onto my website and just take a look around. I do have some materials for lawyers that are involved in this space. Just a questionnaire perhaps that you could ask your clients to see if it's gonna be an issue. And I, do book Cryptocurrency consultations, so that's also available on my website.

Ryan Kalamaya (37m 36s):
Well, Anthony, thank you for the tutorial on Cryptocurrency And. We really appreciate the time and the insight. Until next time, thanks for joining us on Divorce at Altitude.

Anthony A. Garcia (37m 48s):
Thank you

Ryan Kalamaya (37m 49s):
Hey, everyone, this is Ryan again. Thank you for joining us on Divorce at Altitude. If you found our tips, insight, or discussion helpful, please tell a friend about this podcast. For show notes, additional resources or links mentioned on today's episode, visit Divorce at Altitude dot com. Follow us on Apple Podcasts, Spotify, or wherever you listen in. Many of our Episodes are also posted on YouTube. You can also find Amy and me at kalamaya.law 970-315-2365.