The Divorced Girl Smiling Podcast Cryptocurrency in Divorce

From Jackie Pilossoph of Divorced Girl Smiling:

If there are cryptocurrency assets involved in a divorce, things can get complicated. Ryan Settle is my guest in this episode. Ryan is the founder of BlockSquared Forensics, which is a cryptocurrency valuation and auditing company. Ryan shares 5 essentials to consider, to ensure your cryptocurrency gets valued correctly. He also talks about how to find cryptocurrency if you're not sure you or your spouse own it. Learn more: https://www.divorcedgirlsmiling.com/cryptocurrency-divorce-and-5-essentials-to-consider/

Financial Empowerment | Cryptocurrency In Divorce Proceedings

Host: Jackie Pilisoff

Guest: Ryan Settle (Founder, Block Squared Forensics)

(Start of Transcript)

Jackie Pilisoff: Welcome to the Divorced Girl Smiling Podcast with your host, Jackie Pilisoff. No one should have to go through a divorce feeling alone and isolated. That's why I created the Divorced Girl Smiling podcast. Every show is 30 minutes, and the guests are my "Divorced Girl Smiling" trusted professionals. They're so wonderful—financial advisors, divorce attorneys, mediators, divorce coaches, therapists, and more. We talk about every subject that you can even think of having to do with divorce.

The podcast is meant to empower you, inspire you, and make you feel really, really confident so that you can have a good divorce outcome and a great post-divorce life. You can find the Divorced Girl Smiling podcast pretty much anywhere podcasts can be found and always at divorcedgirlsmiling.com. So grab a cup of coffee or a glass of wine and start smiling.

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Did you know that 52 million American adults currently own some form of cryptocurrency? And obviously, a lot of those people are divorcing, getting divorced, or are already divorced. And what happens in divorce cases is that attorneys aren't trained to deal with the valuations of these currencies. Furthermore, I'm pretty sure my guest is going to confirm that this is correct, but cryptocurrency is easier to hide in a divorce than regular money.

So, I want to introduce my guest, and then that's the first question he's going to answer. My guest is Ryan Settle. Ryan is the founder of Block Squared Forensics, which is the first and only blockchain forensics and cryptocurrency auditing firm dedicated exclusively to family law. Ryan has all these credentials that I could read, but I don't even know what they mean, but maybe he'll tell us later in the podcast. Hi, Ryan.

Ryan Settle: Hello! Thank you so much for having me. I really do appreciate this opportunity.

Jackie Pilisoff: Well, I'm so looking forward to hearing about this because I'm not a cryptocurrency person. I don't really know much about it, but I know that I'm almost the minority. I mean, everyone is into these cryptocurrencies. And then what happens is they get divorced, and these lawyers don't really understand how to split it up. And then tell me—the question that I asked—is it easier to hide cryptocurrency than regular money?

Ryan Settle: Absolutely. For multiple reasons, actually. The first is that most people—attorneys, judges—they're not intimately familiar with cryptocurrency. The required financial disclosures will be produced, and oftentimes will even show that there is a trail of movement of this cryptocurrency. And they just take the person's word at it. They look at it, and they nod and go, "Thank you so much, looks great."

There's not really any digging or looking or even understanding of what they're looking at. And the person who has the cryptocurrency probably knows this. So they're like, "Ah, let's just disclose it because we have to legally, but we'll just do it this way and kind of brush it under the table."

Jackie Pilisoff: Absolutely. It's like pulling teeth to get the right documents. They give just a little bit at a time just to make you feel like they've satisfied that requirement and hope that you don't have follow-up questions. And it can take some time to get all the documents and all the addresses because of that.

Okay. So tell me about why you started Block Squared. Because I think you told me when we were talking earlier that you had a couple of friends and family members maybe who had cryptocurrency, and they asked for your help, and you were like, "Wow, you know, this isn't a coincidence. There are so many cases like this." Is that kind of how it started?

Ryan Settle: Absolutely. I'm a curious individual by nature. I like to understand how things work. And so I just was fascinated by the market infrastructure and cryptocurrency and just wanted to learn how this worked. I spent some time researching, doing data analytics, and it was just for fun. I didn't think I would really use it for anything other than my own enjoyment.

And then I had a family member through a second marriage that was getting a divorce. We'd only met once, but you speak to this family member, speak to another, and you hear things kind of going on. He used to have crypto, and from their understanding, it was pretty much all gone—only a few thousand left. This individual was willing to live out of his car, give up the house, give up everything. He just only wanted the crypto—just that small amount, "it's no big deal"—and his car.

They were just a few days away from signing their MSA (Marriage Settlement Agreement), and I finally convinced them, "Let me take a look at this address. Let me take a look at what was given to you." And it took me just a few moments to realize there's a lot more going on here. There's been a lot more movement than has been claimed. Is it fraud? Is it really his? There's two and a half million sitting over there. Was he a victim or is he a perpetrator?

Jackie Pilisoff: Okay, so this guy was willing... So it was he had $2.5 million, but he was willing to live in his car and act like he had no money and no place to live so that no one would pursue the $2.5 million so he didn't have to split it, right?

Ryan Settle: He didn't want anyone to have follow-up questions. That includes rushing through to sign as quickly as possible. And this was in another state where all the required financial disclosures were provided. And so according to the court, he provided everything that was a necessity and a requirement, and it should show everything.

Well, unfortunately, they didn't show everything. They even brought in a digital forensics company specialized in computer forensics, and they drafted a report—26 pages—and they had three questions that they sought to answer. They couldn't answer any of the three. And while they had pages of qualifications—highly skilled experts, way beyond my ability in digital forensics—none of it overlapped into the blockchain sector.

It became very apparent when looking through their report because they were making claims that were technological impossibilities. They were assigning value to things that had no value. It was a mess.

Jackie Pilisoff: Okay. Now let me ask you this. If someone's listening to this and they're thinking, "You know, I want to find out if my soon-to-be ex has cryptocurrency." Bitcoin... What are some other cryptocurrency names?

Ryan Settle: Yeah, our main ones that we usually see are Bitcoin, Ethereum, Polygon. Those are the main ones. Sometimes Ripple, which is known as XRP. Those are the big ones, the larger market caps—almost like Dow-listed stocks. They're the names that people know: Apple, Nvidia, Microsoft. But then there's a whole bunch of smaller powerhouses as well that make up the nearly close to $4 trillion market cap on all of these companies.

And more are being released every day. Not necessarily using like Bitcoin or Ethereum for making payments, but more of an infrastructure type thing as well. And so there are multiple complexities. It's not always cut and dry on what the value of something is.

Jackie Pilisoff: Okay. So what should somebody look for if they're saying, "Okay, wow, now I'm freaking out. What if my ex has cryptocurrency and I don't know about it?" What are some things they can do to find it?

Ryan Settle: Absolutely. So one of the amazing things that we use as a tool is that in order to get regular money—our US currency, fiat—onto a blockchain, they have to operate with what we call a compliant exchange. Coinbase is the name that almost everyone knows. They are a compliant exchange. They're registered. They go through very similar processes that financial institutions do. They're held to a higher standard. And so they take everyone's identification, they take facial scans from multiple angles, and they verify that.

Once that's processed, then you can do what we call "on-ramping." You take a credit card, you take a bank account, and you move funds onto that exchange. And so no matter what, we will see movement from a bank account or a credit card statement into these exchanges or through other providers that all they do is specialize in that tiny little aspect.

Coinbase does a lot, but there's others such as Ramp, MoonPay. There are dozens, if not hundreds, that are odd names that you would not recognize on a bank statement. And if you Google them, they will show up as being a cryptocurrency provider. Also, to get money off of it, they have to use those same mechanisms and methodologies.

And so oftentimes if it's an exchange, we can subpoena, and we can see everything incoming and outgoing from the history of their account. They maintain their records for a long time. It only gets really fishy once we start looking at Bitcoin ATMs—which yes, they do exist—which can be very complex. They're all over the place; people don't even realize it. Coinstar actually has a deal where they can be used as Bitcoin ATMs. And so that adds more layers of complexity.

Once people move off of those exchanges, it becomes what we call pseudo-anonymous. If you're looking at those wallets off of the exchanges, you can't identify whose it is. It's much like a bearer security. Whoever holds the access to it, it's theirs. It's their money. If they lose it, it's gone forever.

And so tracing and tracking those between compliant exchanges is how we're able to determine this is theirs. We have a map of all the flow of funds, and we can see where they're moving everything, and we can even find different bank accounts that you might not know exist. We can also take a look at application-based apps like PayPal and Cash App—they actually allow you to purchase cryptocurrency too. Venmo, and just recently Telegram, which is a privacy messaging app, has their own wallet as well. And so what used to be probably regular transactions that you might see and anticipate—PayPal—it very well might be cryptocurrency transactions now.

Jackie Pilisoff: Okay. So how somebody is going to find this is in discovery. Your lawyer's going to find it, right? I mean, in a typical divorce, if your ex doesn't say... you know, if you're in mediation and it doesn't come out, then in discovery they're going to find it. And that's kind of where you come in, Ryan. Right? So somebody can either hire you to evaluate these cryptocurrencies or find them, or lawyers can hire you to find these. Is that what Block Squared does? They can help individuals and they can also help divorce professionals like financial advisors and divorce attorneys find the currency and then put a value on it?

Ryan Settle: Absolutely. And while I'm not a CPA, I do all my own taxes—hundreds of pages because of cryptocurrency transactions—so I'm intimately familiar with that area. So I can even give a recommendation to seek a proper tax consultant because a lot of people don't know their tax liability when it comes to it. And we want to make sure that if you weren't privy to what was going on, that liability is assigned to the other party.

We don't want you to be responsible for those capital gains or the losses. We want to make sure you're taken care of because you were wronged. They hid this from you, and they wanted to take something from you and go away with it on their own. So they should be the one with that liability. And so we take a look at every aspect and every angle to make sure that not only do you get an equitable settlement, but also the terms are more in favor of you because you are the wronged party.

Jackie Pilisoff: I'm going to take it a step further. You could actually help accountants because probably half of them don't even understand cryptocurrency either. They're just like a normal person when it comes to cryptocurrency. I mean, they might pick it up a little bit quicker, but I'm sure that you talk to a lot of accountants too who say, "Hey, can you tell me what this is worth?" Right? And they don't quite understand it either.

Ryan Settle: It's something that older accountants feel like they—and attorneys feel like they—don't need to know because anything that comes along they can pass along. "Well, we're close to retirement, go somewhere else." But that's becoming very normal and it unfortunately should not be.

Jackie Pilisoff: You're listening to the Divorced Girl Smiling Podcast. My name is Jackie Pilisoff, and I'm your host. And today I'm here with Ryan Settle, who is the founder of Block Squared Forensics, the first and only blockchain forensics and cryptocurrency auditing firm dedicated exclusively to family law. Obviously, Ryan and I are talking about cryptocurrency and divorce. We're going to take a short break, and when we come back, we're going to talk about five essentials to consider if you're getting divorced and there is cryptocurrency involved. We'll be right back.

(Commercial Break - Summary: Jackie promotes Luke Solder of Vado Investment Advisors and Mara Linder of Modern Mediation.)

Jackie Pilisoff: Welcome back to the Divorced Girl Smiling podcast. My name is Jackie Pilisoff and I'm your host. And today we're talking about cryptocurrency, getting divorced, and how to put a value on it or how to find it. My guest is Ryan Settle, founder of Block Squared Forensics, which is a blockchain forensics and cryptocurrency auditing firm. And Ryan is exclusively working in the area of family law. If you want to learn more, you can go to blocksquaredforensics.com. You can also find Ryan and Block Squared in the trusted professional section of Divorced Girl Smiling.

And Ryan, I want to get into things that people should know if they're facing a divorce and they already know that there's cryptocurrency involved. Let's say you already know, or you saw it on a statement, or it came up in discovery. Now what?

Ryan Settle: Absolutely. And so one of the first things to know is what we call digital wallets. They act as kind of a bank account. And so that's where the money comes in and out of. And people generally don't just have one digital wallet; they have multiple. They have wallets on small USB flash drives, very similar to something like this, where if you lose that, it's gone. People have it stored on their desktop, on their phone. That can even be written down on a piece of paper or inscribed in metal and placed in a safe or safety deposit box. There are many ways to safeguard that.

And there's no third party to assist you with gaining access. No phone number—unless it's a Coinbase. And so there's multiple ways that can be stored. And so it's not always cut and dry on where it's located. And we need to really dig in to figure out, okay, where are all those moving pieces going?

Jackie Pilisoff: And if the person won't tell you, how do you find it?

Ryan Settle: Exactly. And so we have a number of tools we can use in our discovery process. We can, if need be, subpoena an exchange or a ramp provider. Generally speaking, when I'm brought in, we keep my existence unknown until it's absolutely necessary to disclose that I'm working on the case.

And there's generally a little bit of panic. We have seen instantaneous movement on accounts within 20–25 minutes of me being disclosed. And so that helps us build our case as well and helps build that narrative that these really are this individual's assets, even though there might not be a name attached to it. The trading activity and account activity between exchanges and what is occurring in the timeline of events will really help us determine this is this individual's.

Jackie Pilisoff: Wow. I mean, this is crazy just because it seems like it's so much easier for somebody to hide it. And if nobody really looks and the lawyer doesn't really understand, then they're going to just drop it, right?

Ryan Settle: And a lot of people rely on what they think are just purely anonymous transactions. A lot of people are under the impression that once it's on the blockchain or once it's in Bitcoin, it's gone, you can't trace it. Well, that's incorrect. Those with the tools and the know-how, we can easily track and trace those things. It takes some time to learn, but it's definitely something that is possible. We're able to easily lay out a narrative with graphs, charts, anything that's needed to show where these funds are coming and going and who owns that.

A new term that people are learning is that Bitcoin and cryptocurrencies are "pseudo-anonymous"—there's a partial anonymous factor to that. And so with the right pieces involved, we can eliminate that pseudo nature and identify whose it is.

Jackie Pilisoff: All right. So what is the allure of anonymity? Is that something people like? Do they think it's cool? What's the purpose of that?

Ryan Settle: We have a mixture of people who fear government overreach as well as fiat currency volatility and stock market volatility. And so they flee to what they think is a new safe haven asset that cannot be controlled by a central bank, where the issuance can't just be "printed money" whenever we feel like it. And so they like that controlled supply. They like the pseudo-anonymous nature of it because they can't be silenced per se.

You know, banks will actually stop certain transactions. There are kind of moral policies in place with some financial institutions. I used to work for a large institution as a business banker, and there were certain businesses—very legitimate businesses, significant numbers of them with significant revenue worldwide—that we refused to do business with because we consider it a reputational risk. But some of that was what we would consider normal. And so some businesses and individuals have turned to that.

Unfortunately, people consider all of that "criminal underworld," but in all honesty, it's only a fraction—a small, small percentage of actual transactions—that are involved in any type of criminal activities. And that's information that comes from our own government as well as research analytics firms dedicated to analyzing the illicit track on these.

Jackie Pilisoff: Okay, let's get into volatility. So is Bitcoin and these other cryptocurrencies, are they volatile? Do they go up and down like the stock market? And then how does that apply to divorce? So it could be worth a certain amount at the beginning of the divorce, then the divorce takes 18 months to take place. By the end, it could have massively gone up or gone down? Tell me about volatility.

Ryan Settle: Absolutely. Cryptocurrency is volatile by nature. Registered financial advisors will not discuss purchasing and selling Bitcoin and Ethereum or any of the cryptocurrencies. The only thing they can discuss are those newer ETFs that are tied to that, as well as some of the trust funds that are tied to that. And you know, that's not direct exposure. You're buying something else. You're not buying gold; you're buying a representation of what someone says "there's gold over there," but you're not going to get it.

And so with that volatile nature, that's why they can't discuss it, because it is not in their fiduciary duty to do that. And so part of the problem with it as well is those divorces can take some time. Even in a three-month time, what you own in cryptocurrency might double, triple, or it might go to zero.

And so at the beginning of one divorce that I worked with, it was a certain amount worth only about $3,000 or $4,000. And then at the end of the divorce, it was worth almost $20,000. And at the beginning, we were considering, "Is this really worth pursuing in the grand scheme of things?" But at the end, it was definitely worth it because it went up by magnitudes.

And part of that volatility makes it difficult to assign a cost basis as well. What is the value? When is the value? Do we value this for transferring at the date of filing or the date of settlement? And so discussing that and working with your attorney is key to determining that because most states don't actually have any legislation or guidelines on when that is. It's kind of up in the air.

Jackie Pilisoff: Well then it sounds to me like all the asset deals kind of have to be made at the very end of the divorce. If there's cryptocurrency involved, they have to check it out, you know, 2 days before the divorce is final and say, "Okay where are we at? Is this worth $20,000 or $100,000?" And then split it up that way, right? I mean, it's got to be done last minute.

Ryan Settle: Splitting the cryptocurrency, if you're dividing it equally, makes it relatively simple. Because we're not looking at the US value; we're looking at the number of units, X amount of Bitcoin. The value doesn't matter. We're just splitting this—you get this, I get that.

But it's when we're taking payment in lieu of—so the spouse is going to keep the crypto ("I've never been involved, I don't want to touch it, I don't want to set things up, it's just too messy") and the other keeps it all, and I get the retirement account... That's where that valuation really comes in, where we need to make sure that you're not getting something lower than what you're actually deserving.

Jackie Pilisoff: Right. Really complicated. What advice do you have for somebody who finds cryptocurrency and wants to make sure they get the most fair settlement possible?

Ryan Settle: I would immediately speak to my attorney and say, "Do you know anyone who can properly value this? Do you know anyone who can make sure that this is all there is?" Because sometimes it's not worth a full investigation. We have multiple tiers for that very reason.

We have a "Trust but Verify" tier, even where everything's going well, but I just have kind of a curiosity. He gave us the Coinbase statements and the Binance statements, but we don't know what we're looking at. And so we can take a quick look and say, "You know, everything looks great. Congratulations, you have someone who's being honest and forthright in this process."

But then we have a "Suspicious Skeptic" tier as well, where it's like, "I don't trust this person. I don't believe them when they speak. They've been a little bit hesitant with providing documents. They used to talk about Bitcoin a lot, but once divorce came up, they stopped."

And then we have full investigations as well, where we immediately work with your attorney, we get on the same page, we work through the discovery process, the subpoena process, we review social media posts. We do a lot of different types of forensic techniques and social engineering. Because oftentimes, if people are active on social media, they'll discuss in their specialized groups their purchases and what their intentions are. And so we can use that and we can help find things that were otherwise undisclosed just by their media posts.

Jackie Pilisoff: Wow. I have one more question. We're kind of running out of time, but a traditional forensic accountant—I'm going to put them in the category with the traditional accountants who might know how to find other things—but I think when it comes to cryptocurrency, they might not really know that either. Do you have to work with another forensic accountant?

Ryan Settle: I have a few forensic accountants that I'm fairly close with, and this is something that they have in their back pocket. They largely don't do crypto transactions because people really avoid it. And so I'm there in case something comes up.

But a lot of these forensic accountant firms, they are kind of the "old guard." And so they have a special way and a specific way of doing things—"This is how we've always done it. I'm not worried about this area. Someone else, someone younger will pick that up." And so you can find firms that are dedicated to this as a tie-on, but they are notoriously expensive, much more so than I am, because they are not a focused group on this. They do so much more, while I solely focus on this and we can rule out all the other stuff.

Jackie Pilisoff: Okay, this is great. So I want to tell people listening: if you are a divorce professional, a forensic accountant, an accountant, a mediator, a divorce lawyer, a financial advisor, anybody, a divorce coach... you should talk to Ryan because he can get called in anytime there's cryptocurrency to find it and evaluate it.

Ryan Settle: Absolutely.

Jackie Pilisoff: Ryan, thank you so much for being on the show. I learned so much, and I'm going to look into some Bitcoin for myself.

Ryan Settle: Well, thank you so much for having me. It was a pleasure getting to speak with you today, and I look forward to talking more with you and helping increase your knowledge in this area. It's something I'm incredibly passionate about and I could talk about all day.

Jackie Pilisoff: I can tell, and I can feel the passion for it. I think it's so wonderful and so needed. And so thank you for all the work you're doing helping people get the most fair divorce they possibly can if there's cryptocurrency involved. really love you. Thank you so much.

Ryan Settle: It's my pleasure.

Jackie Pilisoff: And if you are listening and you want to talk to Ryan, the best place to find him is at blocksquaredforensics.com. or you can find him on Divorced Girl Smiling in the Trusted Professional section under Cryptocurrency, and that is by going to divorcedgirlsmiling.com. You can also go there to listen to more podcasts, read articles, or sign up for my free consult where I talk to you for about 30 minutes, listen to your story—it's all confidential—and then I make recommendations to professionals I think can help you get the best possible outcome in your divorce.

Thank you so much for listening everyone. We'll talk to you real soon.