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Cryptocurrency Disclosure in Litigation

As technology develops at an ever increasing pace our court will be challenged to adapt. This is apparent in a recent family law decision of Justice Nakonechny in M.M.D. v. J.A.H. 2019 ONSC 2208 (CanLII).

The case is a child support variation claim by the support recipient. The income of the support payor must be determined for the purposes of determining the quantum of child support payable, including the level of contribution toward educational and other special expenses within the meaning of the Child Support Guidelines.  The support recipient requested disclosure of the payor’s income and income generating assets and the payor responded by highlighting the unique nature of one of his investment assets:

  [43]           The Applicant also points to the Respondent’s investment in cryptocurrency, which is valued at about $10 million. She asks that the court attribute interest income to this investment in determining the Respondent’s income. She questions the Respondent’s failure to provide actual evidence of the value of this investment and seeks production of unredacted statements of the Respondent’s cryptocurrency holdings.

[44]           The Respondent advises that he has or will produce the relevant documents available to him evidencing his bitcoin investments. However, he states that he does not have records of historical transactions and that evidence of the transactions themselves exist only at the time of exchange.  Bitcoin “accounts” are not held by third parties like bank accounts and therefore, he says, the account documents listing transactions cannot be produced like traditional bank accounts.

[45]           The Respondent resists providing unredacted documents because of what he says are the unique security risks that surround bitcoin and other like investments. He states that the disclosure of his investment information in the public domain could result in cyber theft or devaluation of the asset. If he is not permitted to produce redacted documents, the Respondent requests a sealing Order to protect his cryptocurrency investments from possible unlawful access.

For the purposes of the temporary child support motion pending trial the Court relied solely on the payor’s Line 150 Income from his Income Tax Return on the basis that the recipient’s claims to impute a greater income based on capital assets and lifestyle inferences could be dealt with at trial.

Regarding the disclosure of the Bitcoin “accounts” the Court deferred the determination for the time being by accepting the payor’s proposal:

 [140]      I have no expert evidence on this issue. It is clearly a volatile, emerging, intangible source of wealth which the courts will have to grapple with more frequently in future.

[141]      For purposes of this case, I find there is no prejudice to the Applicant if she receives the disclosure of the Respondent’s cryptocurrency assets in redacted form. There is a greater risk of prejudice to the Respondent if he is required to produce them in an unredacted form which could compromise the security of this substantial asset.

These issues are equally applicable in estate and corporate-commercial litigation. Going forward counsel dealing with these types of assets will be required to provide expert evidence to assist the Court in crafting a relevant but secure disclosure order.

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