If a customer owes you money for unpaid invoices, there are a number of ways of pursuing them to recover your money. Ultimately, you can take them to court or initiate an insolvency process against them. Either way, their assets will be assessed, and you can hope to receive at least a proportion of what you’re owed.
But what if some of their assets are too well hidden to be found? It’s easier to do now than ever before, due to the rise of cryptocurrencies.
What Are Cryptocurrencies?
The best-known example of a cryptocurrency is Bitcoin. This, and the 1,800-plus others like it, exist only in cyberspace. Rather than being backed by either a government or a bank, they’re decentralised, meaning that there isn’t any single controlling interest.
Bitcoin has enjoyed a rollercoaster ride since its introduction in 2009, when one bitcoin was worth a mere 0.3p. By December 2017, the value had soared to almost £15,000. Then came the crash, with the currency losing 70% of its value in the following three months and fluctuating since then.
The crash was partly caused by a number of major hacks and thefts, exposing the risks of cryptocurrencies. The lack of regulation that has made them so attractive to investors also leaves them vulnerable to attack.
Hiding Assets in Cryptocurrencies
It’s extremely difficult to prove that someone owns assets in cryptocurrencies, due to their anonymity. Even if you manage to trace ownership, establishing the value of the assets is close to impossible. This has prompted the use of these currencies to hide assets for reasons ranging from criminal activity to protecting them from divorce settlements.
Inevitably, this approach is also used by debtors. If they hide substantial assets in Bitcoin or another cryptocurrency, this leaves them free to receive a county court judgement or an insolvency ruling based on what they appear to have and recover the extra funds later — leaving you, as creditor, out of pocket.
What Can Be Done?
While it’s extremely difficult to track down cryptocurrency assets, it’s not impossible. The initial purchase will have been made with normal currency through an exchange such as Coinbase, providing a starting point. From there, a developing form of investigation, using both financial and IT expertise, has a chance of finding the hidden assets.
This is a complex and cutting-edge approach, requiring specialised skills. If you think one of your bad debtors may be hiding some of their assets in cryptocurrencies, you’re very welcome to give me a call and discuss your options.