In 2013 Wife [F] petitioned for divorce from Husband [H]. Including in her filings was a temporary restraining order that prohibited H from “…[t]ransferring, encumbering, hypothecating, concealing, or in any way disposing of any property… without the written consent of the other party or an order of the court, except in the usual course of business or for the necessities of life.”
After W’s filings, H made three bitcoin purchases from the MtGox company using three different proxies. MtGox had hacking problems and ultimately lost over $7 billion in bitcoin orders. H had moved two of his accounts into his personal MtGox “wallet” and was spared some of the problems when MtGox went bankrupt. H knew of MtGox’s problems, but failed to disclose them to W, nor did he file a claim for his portion of MtGox’s bankruptcy. He also claimed less interest in his bitcoins than actual fact. However, his bitcoins’ worth increased in value to $8 million from just over $100.000 in purchases.
In 2017, the divorce was finalized and W received her half of the bitcoins’ value H said he had acquired. When W found out that H had lied and failed to disclose the true value of the bitcoins, she asked the court to re-open her case based on fraud. The court reopened the case and found in W’s favor. The court found H had violated the restraining order from W’s original filings, had violated his fiduciary duties to W, and that he had affirmatively hid information.
H appealed claiming that the information he failed to provide was immaterial to the case and that the divorce’s final judgment from 2017 should stand.
The Appellate Court agreed with the trial court.
H’s appellate argument was that telling W about the bitcoin purchases, MtGox’s bankruptcy, and the increase in value of the other bitcoin purchases, would have been useless information to her. She paid no attention to the financial aspects during the marriage so she wouldn’t pay attention after the divorce.
The Appellate Court upheld the trial court’s interpretation of Family Code’s Sections 721 and 1101. Section 721 provides “…in transactions between themselves, spouses are subject to the general rules governing fiduciary relationships that control the actions of persons occupying confidential relations with each other. This confidential relationship imposes a duty of the highest good faith and fair dealing on each spouse, and neither shall take any unfair advantage of the other…” Family Code Section 1101 states that “…Each spouse shall act with respect to the other spouse in the management and control of the community assets and liabilities in accordance with the general rules governing fiduciary relationships which control the actions of persons having relationships of personal confidence as specified in Section 721, until such time as the assets and liabilities have been divided by the parties or by a court. This duty includes the obligation to make full disclosure to the other spouse of all material facts and information regarding the existence, characterization, and valuation of all assets in which the community has or may have an interest and debts for which the community is or may be liable, and to provide equal access to all information, records, and books that pertain to the value and character of those assets and debts, upon request.”