Cryptocurrency in Divorce: How to Value and Divide Digital Wealth

David Bulitt: [00:00:00] Welcome to JGL Law for You. JGL Law for You is a podcast by lawyers, but not for lawyers. Only on JGL Law for You do we discuss a wide array of topics to help you navigate the many legal processes, developments in the law, other current events, and how they may affect you, your family, or your business.

Today, we have Christopher Castellano, a partner of mine at Joseph Greenwald & Laake. Chris represents clients in Maryland and the District regarding their domestic law issues, which include custody, divorce, and modification actions. Like me, Chris encourages his clients to approach their cases with a focus on understanding foreseeable risks, determining how to mitigate those risks, and then performing a risk-reward analysis to find the most beneficial outcome for their case.

Sounds pretty good, Chris. Sounds pretty good. Hope you can accomplish that each time you get somebody on board. Welcome aboard.

Christopher Castellano: That’s the goal. Thank you. Thank you, Dave.

David Bulitt: So, Chris, everybody wants to know. We read about it. We see it in the paper. We [00:01:00] see it in the news. Crypto. You can buy it at Safeway now, for God’s sake.

We’re going to talk today about crypto and what it is, and how, if at all, it can be an issue in a family case. But first, let’s start at the beginning. What the hell is it? Is it money? Is it sky? Is it sand? What the heck is it?

Christopher Castellano: Well, it’s a whole lot less available than sand, that’s for sure. Cryptocurrency is; there’s no other way to think about it outside of being digital or virtual currency.

So briefly, our currency that we’re all used to, the fiat currency — the dollar, the pound, the Euro, whatever it may be — it’s fiat currency, and it’s centralized. Right? And that’s what I want to focus on. It’s centralized. In America, we have our fiat dollar that is based in the Federal Reserve.

Okay. Cryptocurrency — and when I say cryptocurrency, I mean all of them: Bitcoin, Ethereum, Solana, whatever it may be. Cryptocurrency is [00:02:00] decentralized. There is no Federal Reserve. There is nothing like that. It is a purely decentralized virtual or digital currency that is tradable.

David Bulitt: Why would anybody buy something that they don’t even know what they’re buying? And if it’s not centralized, there’s no bank. In the old days, there was a gold standard. Why would anybody, I know we’re talking about how it’s involved in divorce, but why would anybody want to get involved in it anyway?

Christopher Castellano: Well, you know, and I think that this is perhaps for a larger conversation, but at its core, people want cryptocurrency because it’s decentralized, because centralization leads to control. Right? And cryptocurrency has grown in popularity because it is a way that people can avoid being controlled with their money. That’s the core fundamental basis of cryptocurrency.

David Bulitt: Okay. So how, how, if at all, can it [00:03:00] be an issue or a part of a divorce case?

Christopher Castellano: Right. So now the rubber meets the road. Cryptocurrency, yeah, you can acquire cryptocurrency through a number of different ways. Let’s talk about the easiest way in 2025, right? You can acquire it by going on exchanges like Coinbase. Everybody knows about Coinbase, so we’ll use that as the model here. But there are a number of different exchanges, just to be very clear. But Coinbase is a very popular one. There’s Robinhood that—

David Bulitt: But what’s a coin? When you said Coinbase, just again, let’s assume folks are learning about what this is for the first time. What is it? What is a coin exactly?

Christopher Castellano: It’s an exchange medium or marketplace, right? So, let’s say you get stocks and you have a Fidelity account and you go onto your Fidelity account and you use it to purchase shares of whatever company, right? That’s an exchange. You can use your Fidelity account to [00:04:00] operate within the exchange to purchase stocks. So Coinbase is your marketplace to acquire what is essentially shares of a cryptocurrency.

David Bulitt: Buy and sell. I mean, it’s a place to buy and sell.

Christopher Castellano: Yeah. Buy and sell, trade, etc.

David Bulitt: Okay. So, let’s talk about the investments, the ability of individuals to hide those investments when it comes to cryptocurrency, and the complexities in terms of how to divide them if you’re talking about, you know, in the scope of a marriage or divorce case.

Christopher Castellano: Crypto is very interesting, right? It’s decentralized, and we know that. However, the one thing that is very important to note about cryptocurrency is that crypto, like Bitcoin, the most popular, is based on the blockchain.

Alright. And I don’t want to get too bogged down with the technicalities of it, but the blockchain is essentially a digital ledger, and it’s a digital ledger that contains all of the [00:05:00] transactions that have ever occurred on that blockchain, which means that any single person can go on and review the entirety of that digital ledger. So, as long as you know the players, the transaction individuals, you can always see what happened on that blockchain relative to that person’s ID number.

So, it’s actually extremely transparent. When you talk about people trying to hide their assets in crypto, when you involve an expert that is knowledgeable in the space of cryptocurrency and the blockchain, you can’t really hide your money.

David Bulitt: But if you’re talking about valuing crypto assets, and again, based on what I read, right, on Monday you can have an account that’s worth $1,000. On Tuesday, it could be worth $10,000. And on Wednesday, it could be worth $80. How do you value that for the purposes of an [00:06:00] equitable distribution in a divorce case?

Christopher Castellano: Yeah, it’s very difficult. You know, when it comes to valuing cryptocurrency, the best way to think of crypto is as an extremely volatile stock, right? We’ve had cases that have stocks that kind of go up and down and up and down. And sometimes you just have to hold your nose and pick a date and say, this is the date. Right? And then the agreement either allows or disallows for market experience on that asset.

Essentially, you could do the same thing with crypto and just hold your nose and say, it’s going to be March 17th, 2025. It’s the date that we say, yes, person A gets half of person B’s Bitcoin shares. And it is valued as of that date.

David Bulitt: So, if you’re talking about negotiating a settlement in a divorce case, it’s easy to put a value on a house. We get it appraised; we know what the value is. You look in a bank account, or a securities or stock [00:07:00] account; it’s going to, you know, there might be a market adjustment, or as we’ve had recently, there might be a tariff-related drop over the course of a few days, but nothing to the tune of 80, 90, or 95% in a day’s time.

So as someone who’s representing a client and talking about how to negotiate things, do you pick a date when you get the value of that crypto asset? Or is it a situation where what you really want is half the assets in the account, so then it’s worth what it’s worth?

Christopher Castellano: Well, I think it depends on what the asset is, right? There are tons of different cryptocurrencies out there. I mean, the list goes on. We all know about Bitcoin and Ethereum, but there are tons of other coins out there and other various different crypto assets.

And I think that if the other side or your side has a large amount of these crypto assets, you’re going to have an expert in your corner. One, a [00:08:00] forensic analyst that has experience, that understands the crypto, understands the blockchain, and can evaluate what we’re looking at. Right?

And my rule of thumb, David, is if you’ve got Bitcoin, let’s just say you have Bitcoin and somebody has a lot of Bitcoin, then set aside the tax implications because certainly anything I say today requires that you have a tax expert on hand as well, right? Cause there are a lot of capital gains considerations that come into play. And if you’re one of those lucky people that bought Bitcoin in 2013, you’re talking massive, massive taxes.

So, let’s set that aside for a moment. What you really need is to look at, alright, I’ve got Bitcoin. Bitcoin is very, very different than, let’s say, some other coin that is trading at a dollar or 2 a coin. Because you have to look at how many coins are in circulation, right?

We [00:09:00] know — the easiest comparison is probably gold, for instance, the old fiat currency backed on gold, like you said. Gold is extremely rare on Earth. That’s what dictated its value. There is a set amount of Bitcoin that’s ever going to be available. And as we continue to mine that Bitcoin, it becomes less and less and less available in the wild, right? And so that’s going to dictate its value.

So, when you have a case that has Bitcoin, I’m feeling pretty confident that it’s not going to go from what is trading, at least the last time I looked at it, at 84,000 a coin, down to 84 cents a coin. The chances of that happening would require probably every government on Earth to change its approach to Bitcoin in such a way that it kills all cryptocurrency, and I just don’t see that as ever being possible.

David Bulitt: But your client says to you, okay, so it’s worth 84,000 a coin, and I need to buy a new house. Can she take her Bitcoin to buy that new house?

Christopher Castellano: Well, you could cash it out. I mean, when it comes to getting Bitcoin in a divorce, let’s say, “Yeah, okay, person A, I’m going to give you all the Bitcoin, and that’s going to be the equitable way that we resolve this,” you know, horse-trading different assets. It’s just like getting stock, right? If the person wants to buy a house, they sell all that stock and take the cash out of the stock.

You could take the cash out of Bitcoin. It remains to be seen if that’s a smart financial decision, but—

David Bulitt: You’re in a negotiation with your client. Your client’s spouse has whatever they have in terms of Bitcoin, in terms of value. And your client says, okay, well, how do I get my hands — if I’m going to get some portion of that Bitcoin account — how do I get my hands on real money that I can buy groceries with? Because I can’t buy groceries with some coin that only exists out on the cloud somewhere.

How do you talk somebody through that and help them understand what they can do and the benefits of dividing that particular asset, particularly [00:11:00] clients who are maybe in their fifties or sixties and are used to carrying cash, much less using debit cards?

Christopher Castellano: Well, so this is when it’s important to have a financial advisor on your team advising the client. Briefly put, that person can take the Bitcoin and go to that Bitcoin exchange, like Coinbase, Kraken, Bitstamp, whatever it may be, and they can just go ahead and withdraw their money. They can sell that Bitcoin on that exchange, and it’s just like you sell your stock on a Fidelity account and you can withdraw that cash.

Every different exchange is going to have fees. It’s going to have processing time concerns, whatever it may be. And there are other alternatives too, right? Let’s [00:12:00] say you don’t want to use an exchange. As crazy as it sounds — and I think that you may have referenced it — at Safeway, there are Bitcoin ATMs. You know, you can go and withdraw cash instantly, but like any ATM, there are huge fees.

I don’t think I’ve ever personally used an ATM that’s not a bank ATM because of that. The Bitcoin ATMs, they have wild fees, so you have to be careful about that.

This is going to sound even crazier, but some of these exchanges have debit cards, crypto debit cards, that will convert it. Again, you’ve got to take into consideration the fees being charged. So, there are ways to convert Bitcoin to usable cash, if you will. I mean, what is it, Tesla? You can use Bitcoin flat out to buy a car with Tesla, and I’m sure there are other companies out there that are allowing for purchase of major assets using Bitcoin outright. Certainly not a house, right? But there are ways to convert your Bitcoin into usable cash, if you will.

David Bulitt: Is there a benefit in negotiation or if you ended up having to try a case, is there a benefit, and if so, what is it, in using someone like a forensic accountant-type person that you might use in terms of valuing your business, in terms of tracing assets and that sort of thing? How, if at all, would you use that type of an expert in negotiating and litigating a divorce case?

Christopher Castellano: So, it depends. Relative to cryptocurrency, it depends on how the crypto is treated by the other spouse, right? If the person was mining for Bitcoin, particularly in the earlier days, I’m going to go out on a short limb and say that you need to have an expert, right? That forensic expert is going to be able to identify how much in terms of resources, how many marital resources, were dedicated to the mining of Bitcoin.

And that [00:14:00] in and of itself is a separate discussion: the process of acquiring Bitcoin through mining as opposed to just going on the exchange and purchasing.

But at the basic level, if the person is just purchasing Bitcoin on an exchange, and you get the exchange statements that show the transactions that occurred, it’s fairly straightforward. You can say, okay, on October 21st of 2021, this person spent $5,000 and acquired 0.0008 Bitcoin. And that’s what the statement will show. Whatever the numbers may be — I’m using funny numbers — but that’s what the statement will show.

So, it’s actually relatively easy for the individual who’s analyzing your case to go ahead and track, alright, $5,000 of marital assets was used to acquire this specific amount of Bitcoin. And then it’s just a matter of taking that specific amount of Bitcoin, plugging it into today’s [00:15:00] value on Google, and then boom, you have a present-day value for the asset.

David Bulitt: Okay. And what about prenuptial agreements? Is it something that can be the subject of what we’re going to do with it in a prenup in the event of divorce?

Christopher Castellano: Oh, sure. Just like anything. I mean, you acquire — and again, let’s set aside the mining for a moment — anytime you’re acquiring an asset with marital assets, what would traditionally be seen as marital assets, that’s subject to, I would say, prenuptial agreements.

You could say, “Hey, any money in this account is considered non-marital, and therefore any use of that money to acquire any asset means that asset would be considered non-marital.” That’s an enforceable clause in a prenup, and I think that that would protect an individual’s future crypto purchases if you had that type of clause.

David Bulitt: Okay. So, to sort of get our hands around the entirety of this discussion, when someone is considering separation and divorce, what are the [00:16:00] key thoughts, the things that they should think about, the key considerations when it comes to crypto assets?

Christopher Castellano: So if it is known to that party that, hey, I know that my spouse acquired crypto and I know that they used Coinbase and I know that they used Robinhood, particularly when it was popular in 2020 and 2021, if that’s the case, then you focus the analysis and the investigation.

If you don’t know what’s happening with the money, then you’re down the road of our traditional forensic evaluation and investigation into the assets, especially if, hey, you know, my spouse makes 15 grand gross a month and we’re scraping by with what seems to be only $1,500 in the joint bank account. I can’t understand what’s going on. It’s not like they’re out there buying — they don’t have a Porsche or Ferrari in the driveway. So, I don’t know why there’s not a lot of money. [00:17:00] That’s when your senses start to perk up, and you say, yeah, something’s going on here, whether it’s a stock or whether it’s some other nefarious expense, or it could be crypto.

David Bulitt: So, you talked earlier about the concept of there being sort of no policing, there’s no control. But folks do have to report if they sell and make a profit, or on the other side, if they sell and take a loss when it comes to crypto, right, on their income taxes?

Christopher Castellano: Yeah, that’s right. I mean, at its core, the blockchain itself is self-controlling, right? Because the only way you acquire cryptocurrency is that there is input onto the blockchain.

So, let’s talk about that just very, very briefly for the audience. You have a blockchain, and each block on that chain is a transaction to that ledger that we discussed before. Mining is simply using [00:18:00] processing power, usually from a computer — particularly strong GPUs or graphics cards now — to compute very, very complex equations, to solve that equation and verify a transaction on that block, on that chain.

The result of that, the incentive to use that processing power to solve that equation, is getting a coin, such as a Bitcoin. And so, the verification process is actually self-controlled in that way, and probably as secure and safe as you can possibly get, far more than traditional fiat currency, which has always been subject to corruption.

And so, you have that as the basis. Now, of course, you’re going to get government agencies that want their cut. And so, yeah, now there are restrictions, certainly SEC restrictions on Coinbase or Binance or Kraken saying, yeah, [00:19:00] anytime there’s a transaction, you got to let us know. I mean, I think it was — and don’t quote me — but I think about five years ago is when the restriction changed so that trades that didn’t even lead to a cash transaction, meaning you sold the Bitcoin for cash, would still have to be reported. But now it’s even just that any trades need to be reported.

David Bulitt: So my point is, what you’re saying is, while there’s not the control that you have with the dollar, with the Federal Reserve, with securities and so forth, there is oversight when it comes to what you’re required to do if, in fact, you trade or exchange cryptocurrency.

Christopher Castellano: Yeah. Once you convert it to their dollars, right, their being the government’s dollars, they’re going to get involved. If you had Bitcoin from back in the day and you put it on a USB thumb drive for what they call cold storage and you kept it under your mattress, no one’s going to know. No one’s going to know about it. You don’t have to report that.

Well, I’m [00:20:00] not saying this as a tax professional, but that doesn’t get reported until it gets converted to that traditional currency.

David Bulitt: I mean, I’ve had cases, and you probably have also, where my client says, “Oh yeah, spouse has crypto.” “Well, where is it?” “Keep it on a thumb drive.” And then you got to find the thumb drive and then presume that the thumb drive that you’re getting as part of the discovery process or as part of a document, you know, information exchange, is the actual drive in which everything is included.

Christopher Castellano: Yeah, absolutely. That cold storage is meant to be very secure, private, and confidential. That’s how it was designed.

Of course, this is when a forensic expert is involved because, again, every transaction on the blockchain is reported on itself. You can’t get it off of that thumb drive without authorization, which is why you always get these fun stories of people who lost their thumb drive. I mean, classically, the story of the guy who lost the thumb drive in the [00:21:00] trash and went to the trash yard. I think I just saw a story last week, or relatively recently, where now the attempt is to buy the entirety of the trash yard.

David Bulitt: It’s very funny because this is going to show my age a little bit, but along the same vein, several years ago, I represented someone who was married to, let’s just say, a military pilot who did a lot of off-the-grid type things for payments. He hid money, in those days, long before Bitcoin, and long before debit cards too, by the way, by burying cash on their farm up in Western Maryland.

And we followed him because we knew he had cash, because he told her that he had cash, but he apparently forgot where it was. And so, when the private detective went up there to take a look and see what was going on at this farm, there was about 500 mounds of dirt because he had forgotten where he had buried this cash.

So, but it’s kind of the [00:22:00] same thing, right? You got to pay attention to where you put it. Although you can track it, you still got to pay attention to where you put it in order to actually get your money back, right?

Christopher Castellano: Oh yeah. No, I mean, it’s pretty wild. I mean, I’m sure you’ve got that drawer next to your desk that has about 15 thumb drives in it, right?

David Bulitt: Sure. I don’t even know what’s on any of them, to be honest with you.

Christopher Castellano: I’m looking right now. And you never label them like you’re supposed to. So, you end up sticking them in your computer and going through the tradition of seeing what pops up. And I guess somebody just says, “Oh yeah, that’s the one that has, you know, now 1.5 million on it.”

David Bulitt: Oh, that’s it. Yeah. Okay. So, if I’m someone who’s thinking about separation and possibly divorce, and I know that my family, my spouse, has been involved in buying, selling, or trading crypto, what ought I do in order to move the process forward?

Christopher Castellano: I think you need to sit down and really think about, okay, when did they start acquiring it? When did they start getting involved in crypto? If we’re talking about somebody [00:23:00] who got involved in like 2013 or 2012, you need to sit down and think real hard about spending that traditional fiat currency on an expert to get involved because you talk about risk versus reward analysis like I always like to do, like you like to do, that’s when you see a pretty high reward in that case, right? Because you could acquire, back in the day, one Bitcoin for 200. It doesn’t take much to show how much $5,000 worth of Bitcoin in 2012 is worth today.

And I’ve seen that case before. I was involved in a case like that. So that’s when you use some practical sense to evaluate things. If a person bought Bitcoin in 2024, okay, well, how much did they buy? You could see on the credit card or the bank statement a Coinbase transaction. However, if you are in your house and you know that your husband or your wife has [00:24:00] a shed out back with a couple of solar panels on it, and they’ve got three computer rigs hooked up with about 15 different GPUs from 2020, you need to use your sense. And again, just like the 2012 purchases, you hire an expert that has actual experience with cryptocurrency.

David Bulitt: Mm-hmm. To start, before you pass go and collect 200, the first place to go, it seems to me, is to call someone like you, who understands the intricacies of cryptocurrency, right? Get a lawyer, right? I mean, shouldn’t they talk to somebody?

Christopher Castellano: Yeah, you get a lawyer, and you get a lawyer who — there are some schools of thought in cryptocurrency, right? There’s almost like a stigma of cryptocurrency, that, “Oh, I don’t know what that is. It doesn’t make sense, so as far as I’m concerned, it’s not real.” I think we’re well past the days where that’s a reasonable approach.

You have a lawyer that knows this is a [00:25:00] serious thing to look at. This very well could be — instead of the days of the house being the largest asset in a marriage — the actual largest asset in the case. It’s entirely possible. That’s why I ask during every initial consult: I ask about the house, I ask about the cars, I ask about the retirement and investment accounts. And I separately ask about crypto, right? Because it is possibly one of the biggest assets in the marriage. And so, you have to have a lawyer that’s involved that respects what crypto actually is and what it could be.

David Bulitt: So, folks out there, if you’re thinking of separating, if you’re looking into the possibility of divorce, and particularly if you have an asset or a potential asset that involves cryptocurrency, you’re going to want to reach out to Chris Castellano. And Chris, how would they get ahold of you?

Christopher Castellano: Yeah, you can call me directly at 240-399-7881. You can find me on our website, JGL Law. I’d be happy to have a [00:26:00] conversation about any crypto concerns you might have.

David Bulitt: Well, Chris, thanks so much for joining us. We’re going to pay you with a Bulitt cryptocurrency today. It doesn’t have a lot of value, but maybe it will in a year or so. It’s completely uncontrolled. So I hope you’ll accept that as payment for your time today, if that’s alright.

Christopher Castellano: I’ll take it.

David Bulitt: Fair enough. I’ll put it on a thumb drive.

Christopher Castellano: Alright. Fair enough.

David Bulitt: Folks, thanks for listening in. Please join us next time. I’m David Bulitt, and this is JGL Law for You.