Cold Wallets & Hot Secrets: Crypto, Privacy, and Asset Hiding in Divorce| Episode 242

Digital Assets, Cryptocurrency & Privacy in Divorce

In this episode of Divorce at Altitude, Ryan Kalamaya is joined by Chicago-based family law attorney Jonathan Steele to explore the rapidly evolving world of digital assets, cryptocurrency, and privacy in divorce cases. As technology continues to shape financial and personal lives, this episode breaks down how crypto works in divorce, common misconceptions, and practical strategies for uncovering hidden assets while protecting client privacy.

Guest Information

Jonathan Steele is a family law attorney based in Chicago with a unique background that combines divorce law with cybersecurity and digital privacy expertise. During the COVID era, he developed a deep focus on digital assets, authentication of evidence, and privacy issues—particularly in high-asset divorce and stalking-related cases. In addition to practicing family law, Jonathan consults on cybersecurity and digital privacy matters, helping attorneys and clients navigate complex issues involving cryptocurrency, digital tracking, and online data.

Episode Highlights

What counts as a digital asset in divorce
Jonathan explains that digital assets go beyond cryptocurrency. They can include domain names, software, online businesses, and other digital property.

The biggest misconception about cryptocurrency
A key myth is that crypto is completely anonymous. Jonathan clarifies that it is actually “pseudonymous,” meaning transactions are permanently recorded on a blockchain.

Understanding exchanges vs. cold storage
Ryan and Jonathan break down how crypto is held. Exchanges like Coinbase function similarly to brokerage accounts, while cold storage wallets (offline devices) act more like a private safe.

Why subpoenas aren’t always enough
Many attorneys default to subpoenaing exchanges, but Jonathan notes that this often misses the bigger picture. 

The “on-ramp and off-ramp” strategy
Instead of starting with exchanges, Jonathan recommends looking at bank statements.

Cold wallets and the seed phrase problem
Cold storage wallets require a private “seed phrase” (often 12 words) to access funds.

What is Divorce at Altitude? 

Ryan Kalamaya and Amy Goscha provide tips and recommendations on issues related to divorce, separation, and co-parenting in Colorado. Ryan and Amy are the founding partners of an innovative and ambitious law firm, Kalamaya | Goscha, that pushes the boundaries to discover new frontiers in family law, personal injuries, and criminal defense in Colorado. 

To subscribe to Divorce at Altitude, click here and select your favorite podcast player. To subscribe to Kalamaya | Goscha's YouTube channel where many of the episodes will be posted as videos, click here.  If you have additional questions or would like to speak to one of our attorneys, give us a call at 970-429-5784 or email us at info@kalamaya.law.

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DISCLAIMER: THE COMMENTARY AND OPINIONS ON THIS PODCAST IS FOR ENTERTAINMENT AND INFORMATIONAL PURPOSES AND NOT FOR THE PURPOSE OF PROVIDING LEGAL ADVICE. CONTACT AN ATTORNEY IN YOUR STATE OR AREA TO OBTAIN LEGAL ADVICE ON ANY OF THESE ISSUES.

Transcript

Ryan Kalamaya (00:38)
Welcome back to another episode of Divorce to Altitude. This is your co-host, Ryan Kalamea. This week we're going to be talking about digital assets, cryptocurrency, and privacy. Normally I'm joined by my esteemed business partner and co-host, Amy Gosha, but this week we are joined by another divorce lawyer. He hails from Chicago and his name is Jonathan Steele.

⁓ He has a fair amount of experience that we're going to talk about in terms of cryptocurrency as well as privacy in ⁓ particular in high asset divorces. before I go on any further Jonathan, welcome to the show.

Jonathan Steele (01:14)
Thanks for having me, Ryan. Pleasure.

Ryan Kalamaya (01:16)
So for listeners to kind of lay the groundwork on your, on your background, can you tell us a little bit about the work that you do and your firm?

Jonathan Steele (01:24)
Yeah, I have a strange credential set, if not background. I do divorce law, family law in general, so orders of protection and things like that too, but the majority is divorce. And then COVID hits and I go down a cybersecurity and privacy rabbit hole that spun off into kind of a consulting firm at this

Ryan Kalamaya (01:43)
And it's one of those things I think lawyers can listen in and who are in our ⁓ audience can relate in certain respects that oftentimes what happens in the practice of law is that you kind of have these cases or issues that you go super deep on and then you become kind of a resident expert. that somewhat, does that resonate with you or can you tell us a little bit more about how you went down the proverbial rabbit hole?

Jonathan Steele (02:09)
You know, I think you're right. And I think it's especially true for family law. You know, we're sort of the black sheep of our field as far as lawyers go. People think, you know, poorly of divorce lawyers. But the reality is you need to know business law, tax law, criminal law, corporate law, you name it all falls under some tangential issue that hits family law. So yes, is the shorter answer. But, know, you know,

digital authentication of evidence has become a pretty big issue in orders of protection cases. Stocking cases have presented a number of issues where having some sort of technical proficiency is obviously an asset to clients that are going through that. So it was somewhat organic and then it was also just some, it's an interest of mine.

Ryan Kalamaya (02:55)
Well, for listeners that ⁓ have heard me talk before, I do enjoy technology. I'm kind of a tech geek. I've had a couple cases involving cryptocurrency and digital assets. One in particular where I went really deep on. So, and it's been a while since we've had any sort of guest or discussion of crypto. So can let's kind of take a step back.

maybe not in crypto in general, but can you maybe walk listeners through in terms of digital assets and how you kind of interact with them or how listeners might think of their involvement in particular in a high asset divorce?

Jonathan Steele (03:35)
Yeah, I mean, digital assets encompasses a lot of different ⁓ categories within that category. Sometimes it can be, you know, somebody has developed software or like a particular domain name for a business that was started during the marriage. And so the domain name itself has some value to it. But the bigger lift for digital assets is crypto nowadays. You know, there's a

Ryan Kalamaya (03:38)
Thank

Jonathan Steele (03:58)
A want of crypto trained divorce lawyers in the city of Chicago, a lot of times, you know, we'll lean on, quote unquote experts in crypto and pay a hefty price for consultation. So just having that knowledge helps to steer clear of that if it's not needed.

Ryan Kalamaya (04:15)
So for divorce lawyers or people that are going through when they hear crypto and they might be looking at a divorce or in the middle of their own divorce, how should we be thinking from your perspective about crypto and maybe digital assets to the extent that the answer is different in divorces?

Jonathan Steele (04:32)
So a couple things, I think there's a pretty common misconception that all crypto is anonymous. That because you don't have your name attached to a wallet address that it can't be tied back to you. That's a pretty common misconception that there is a permanent ledger of all the transactions that occur. And so it's pseudonymous at best.

And, know, once you've traced somebody's wallet address for one transaction, it starts to peel that onion back pretty, pretty well. The other thing that I would say is that a lot of traditionally trained divorce lawyers are, they're looking in the wrong place pretty often. They're issuing subpoenas to an exchange, you know, they're hitting Coinbase with a subpoena.

And maybe they get compliance or maybe they get some pushback about, you haven't domesticated your subpoena here. But there are easier paths to getting the information that people are looking for than going straight to Coinbase. And if you get a subpoena response back from somewhere like an exchange and they say there's nothing there, that's not the end of the inquiry. There are cold storage wallets that people are hiding money on that, you know, you can only open that with.

the 12 word seed phrase that somebody may or may not be willing to turn over during a divorce case. just understanding the architecture and the nuances I think is important for divorce lawyers in general.

Ryan Kalamaya (05:55)
Okay, well, let's start with the easy, the low-hanging fruit. You mentioned that there were easier ways. Can you maybe talk about from your perspective, what are the easier ways to determine digital assets and crypto in ⁓ a divorce?

Jonathan Steele (06:08)
So, yeah, the on-ramp and the off-ramp is normally an easier place to find somebody that has squirreled away some money in crypto. So what I mean by that is the money is coming from somewhere. So you're looking at bank statements and you're seeing large transfers to Coinbase or another exchange. That's the on-ramp. And then the off-ramp is what are they using it for? So are you seeing...

know, transactions at like a bit refill card or are they buying some sort of like luxury good and where was the source of funds from? So even for the lawyers that aren't inclined to get into the nitty gritty of like blockchain analysis, I think that starting with what was the source of funds is a good place to start.

Ryan Kalamaya (06:51)
Well, you're in Chicago, ⁓ Illinois. I assume we've had some prior guests on from Illinois and I know enough about Illinois law to be dangerous. not barred there, but I guess for our audience, they've heard about rule 16.2. So in Colorado, there is a duty of full and fair disclosure and people going through divorce. We have our hypothetical divorce clients.

Eric and Melanie Wolf. So if Eric has crypto, ⁓ he has some information or not information, but he has Bitcoin and Ethereum. And we can maybe talk a little bit about those on an exchange, which you mentioned Coinbase. He would be obligated to put Bitcoin and list that on his sworn financial statement, which is in any sort of divorce. then what I think you're referring to is

What happens when Eric doesn't disclose that Bitcoin? And if you're representing Melanie and you have a suspicion, then what I'm hearing you say is, well, we should go through Eric's bank statements. And if we see outgoing transfers from the bank account Chase to Coinbase, then that's going to be a red flag that we need to ask for some more information. Anything else?

that we should be thinking about or looking at. And then I'm ask you about kind of the cold storage for that kind of related scenario. But what are the things that maybe I overlooked or that Melanie might be concerned about?

Jonathan Steele (08:21)
No, you've hit it pretty well. And Illinois is similar, albeit with different rule numbers. So in Cook County or Chicago, we've got 13.3. That's a mandatory duty of disclosure. You fill out a financial affidavit. You list all your income, your assets, and your debts. The problem is pretty often people don't fill those out accurately for whatever reason. Maybe they're trying to withhold information. Maybe they're just not doing it well.

But pretty often somebody leaves something off. So it is what I was referring to is more about Melanie has a suspicion and she's telling you I know he has money and he's not disclosing it. Well, then you have to, you know, open your toolkit and figure out how am I going to remedy this for her or at least be able to answer the question definitively so that

You know, you're checking that CYA box as a lawyer, but you're also helping the client to sleep at night knowing either there was or there wasn't some crypto that she wasn't awarded.

Ryan Kalamaya (09:19)
Right. So for ⁓ someone like me, if I'm representing Melanie, then that you mentioned a subpoena, but probably at least for my toolkit, I would first serve a request for production on Eric and ask him, and there's an interrogatory. I've seen different lawyers have this, and I think it's a CYA for them in terms of identifying.

all cryptocurrency that they may have or digital assets and so they'll name exchanges, then they will also ask a request for production for transaction history or something of that variety of, produce something tangible like a document that is related to that exchange. But I guess for listeners to take a step back, can you walk people through what is an exchange and then

What might be problems with producing documents, example, from Coinbase? And then what is cold storage?

Jonathan Steele (10:19)
Yeah, so an exchange is sort of what it sounds like. You you go on, you make a profile, you link your bank account or funding source to Coinbase or a different exchange. And from there, you can buy a number of different kinds of coins and you have the ability to store them there or you have the ability to transfer them to a different sort of wallet that could be cold storage. And when I say cold, I mean, it's not connected to the Internet. So it's like a ledger.

device that you load your crypto coins onto and you can put it into a safe deposit box. You can put it into a safe. You can hide it under your mattress. You can do whatever you want with it. And what's keeping your spouse from those assets is your willingness to disclose that it exists. And then the 12 word seed phrase. And you're right that we have interrogatories as well. And we have requests for production of documents and

One of the less conventionally used applications of a document request might be asking someone to produce like a dump from their password manager because pretty often that's where those seed files are stored in a password manager. And once you have that, you've got your hands on the asset that you want to be divided.

Ryan Kalamaya (11:33)
I love that idea. I'm preparing for, doing a conference or a presentation on AI and the other attorneys and I that are doing the presentation, we're talking about the chat GPT and whether one lawyer said he saw the requirement that, or someone had asked for discovery on a person's chat GPT history, like their search history. And so it's kind of a similar dynamic in terms of what is your passwords and what

I hear you say, which I think is brilliant is what's your kind of essentially username and password for Gemini or Coinbase. I think for people, they might understand that an exchange could be something similar to like E-Trade or Schwab for stocks or bonds that you buy Apple stock, you buy it vis-a-vis Schwab, Schwab or Fidelity owns or not owns, but is kind of a custodian of that stock.

but the stock is different than your username in terms of the exchange. And then, I think another analogy that might resonate with people is that the exchange is kind of almost like a bank, like Schwab in the sense that people think of a Schwab as a bank or Chase, but then that cold storage is kind of like the personal piggy bank, except it's a lot more.

You could either have it on like a USB like thumb drive or you you could have it somewhere in terms of like a hard drive or on your computer, right?

Jonathan Steele (12:57)
That's right. mean, there's ledger, there's treasurer, there's then there's wallets that are even a little bit more advanced, like a multi-signature wallet where you need multiple keys to be able to transfer funds or funds past a certain threshold. anybody that has a substantial amount of cryptocurrency and the requisite paranoia that comes with that is probably not storing significant dollars in their

exchange wallet. They're probably putting it in cold storage because it helps people sleep a little bit better.

Ryan Kalamaya (13:27)
Right, because one of the advantages are the people that are attracted to crypto really like that autonomy, that it's not connected to central bank, that it's decoupled from the financial ⁓ industry, the DeFi and those that kind of philosophy that you don't want to be in the normal financial system. think for people that might not understand that, I imagine you can explain

what's kind of the basis or what's the rationale behind, for example, like Bitcoin, like Bitcoiners, like why are they so adamant about, you know, cold storage and is it just that they're trying to hide stuff in divorce or is it because it's part of that culture to begin with?

Jonathan Steele (14:11)
I mean, I think it's going to be different from for everybody. Everybody has their own motivation for why they choose one wallet over another. You know, this is just sort of like the modern day Swiss bank account is the cold storage. And, you know, it's from a technical perspective, it's going to be more secure. Anything that's touching the Internet is going to be less secure inherently than something that has no Internet access. And Coinbase and Kraken and a number of other places, they do it.

good job of security. They allow you to lock up your accounts with hardware security keys and things like that. It helps a ton. If your account is locked down with a hardware key and no other method allows you in, you're doing better than most people. But some of these accounts, the multi-factor authentication to get into them might be tied to...

a cell phone, an SMS text message that is susceptible to SIM swap attacks. And we've seen big money wallets get drained to zero because somebody got SIM swaps because they had a bad form of multi-factor authentication, they had a bad password, whatever it is. Whereas your hardware wallet that's sitting in your safe with no internet access, it's going nowhere.

Ryan Kalamaya (15:23)
Right. I mean, it's kind of almost the equivalent of having that gold coin or the cash, the, you know, a hundred dollar bills stacked up in a safe. And that I think people can, you know, relate to that. Switching gears a little bit. Can you maybe talk to me a little bit about the digital privacy and some of the other issues that ⁓ you frequently will be involved with?

Jonathan Steele (15:47)
Yeah. So it's a pretty common suspicion when somebody comes in to a family law firm, whether it's for divorce or a stalking order, order protection. There's a suspicion that somebody, whether it's their spouse or their significant other or someone familial relationship, knows more than they should know. They know where I am, when I'm going to be somewhere. They knew I was on vacation and they had no way of knowing that.

and they have access to my phone or they've put spyware on my phone. And, you know, as a lawyer that understands the terminology, it's about taking that sort of raw information and translating it into an actual action that can help the client. In all likelihood, they don't have spyware on their phones. know, iOS does a great job of protecting against that. But what they mean, it might be something like,

You know, I still have my spouse sharing photo albums in iOS, or I might still be sharing my location and forgot about it, or I might have a shared album, or my kids might have an air tag that my spouse has the ability to track. And so just sort of being able to translate that into, let's see what's actually happening and unplug that is valuable.

Ryan Kalamaya (17:01)
Yeah, it's kind of almost the other side of the coin if we're kind of mixing metaphors about like hard currency of a coin, but it's on one hand, we've got the kind of cold storage and Swiss bank account idea of hiding information, but then this is the other side of the coin of I want to have privacy and I don't want the other spouse to know too much if we're going through a divorce. And so I guess. ⁓

I have certainly seen, was in trial just ⁓ last week and a text message that my client had obtained because the husband had left open his computer and his iMessage was logged in. And so him texting with his brother about what was, what his strategy was for the divorce, it came up on a computer that my client had easy access to. And so, you know, it's

that and then the air tag of following someone and tracking someone, it happens all the time. So Jonathan, any kind of best practices when it comes to digital privacy?

Jonathan Steele (18:09)
There's a lot, know, the air tags is tough. They're getting better. You know, they beep when they're following you and they shouldn't be, but people are getting a little bit smarter. It's cat and mouse. They're taking the speaker out so that they avoid that. But as far as like just sort of like general things that help people's privacy, I think it depends on what the issues are. If there's a child involved, if there's like a maintenance fight that's going on.

You know, I tell people pretty often as much as it pains most people to give up a limb, asking them to give up social media for at least the pendency of the divorce is pretty common recommendation that I'll give. And part of the reason is people just aren't using it well. And so they're posting photos in real time. And so you're sort of just advertising, I'm on vacation, I have money to spend, I'm spending money. Maybe I'm with a new pair or more.

and you're giving them just like a real time feed to what you're doing. The more scary version of that doesn't happen a lot anymore. think like Instagram and these other platforms are stripping metadata before they're being presented to other users. But sometimes if you're sharing a photo on some platform, it might still have metadata that shows when it was taken, where it was taken to the point of like a GPS longitude latitude.

what kind of camera it was on, what kind of lens, was there a flash? It gives you a lot of information about the photo just by downloading it and looking at the metadata of it. So I try to caution people to put a pause on social media while their case is pending.

Ryan Kalamaya (19:44)
Yeah, I had a situation where I represented Eric Wolf and it was obviously not Eric Wolf, but the equivalent. And he showed up for court and claimed that he had very little money or not enough money to pay for spousal support alimony. And then the wife's attorney promptly whipped out Facebook pictures of him with his new girlfriend at like a really nice restaurant.

in California on vacation and the optics were less than ideal. know, lawyers, we always learn from experiences. So certainly I have an email that goes out that says, please do not post on social media. Don't delete anything because that is fair game, but going forward, don't delete anything. I recommend generally that people should be resetting their passwords in particular for iCloud.

⁓ in email, cause as lawyers, need to be able to communicate with our clients and know that the other side's not looking ⁓ in on those things. You know, the, the banking, username and passwords is a little bit tricky because oftentimes in a divorce, people are wanting to have access to bank accounts and see what, what have we spent? And like, that's fair. And like, it takes up a lot of bandwidth with lawyers exchanging statements. And it's a little bit easier of.

hey, here's the joint bank account username and password. You guys have been totally checked out. Melanie, you've always been checked out on financials, but knock yourself out. Here's the username and password. You can go download all those statements. That's a little bit different than the other circumstances in which it can be advantageous to reset those. So anything else you wanna add on that topic, John, then?

Jonathan Steele (21:25)
No, I think you're right. You know, I try to triage a little bit and the communication between the lawyer and the client is the first thing that needs to be locked out. If you can't communicate freely with your lawyer, you're in a bad spot. So I will usually go a step beyond change your email password. might make clients create a new email account. It might be on like a proton mail or somewhere that's a little bit more privacy and security focused. And then I'll

you know, drag clients kicking and screaming onto Signal as opposed to using iMessage just because it's more privacy and security focused. And it's, you know, it's easy enough for clients to use it. It's still user friendly. So I will very often get clients on Signal for phone calls and messaging. I'll get them onto like a proton mail for emailing. And then I feel better about my communication with them not being read by their spouse. So I think

those things are important.

Ryan Kalamaya (22:18)
Well, any other kind of things that we haven't covered on digital assets and when you mentioned kind of high asset divorces or complex divorces, what are the things that I think people should be in particular aware of when it comes to digital assets, Jonathan, that we haven't already covered?

Jonathan Steele (22:37)
So I think judges, this generation of judges starts to retire, it's less of an issue. We have newer judges, younger judges that are taking the time to understand the issue. But while that's happening, some of the older judges don't really understand crypto. They don't understand the issues that are being presented to them. They don't want to engage in the discovery fights that come with crypto. And so they're defaulting to

If you can just show me that there was an asset and now we don't know where it is because somebody's being cute. they're storing it on a hardware wallet. They're denying it. They're, they forgot the seed phrase to unlock it, whatever it is in Illinois. We call that dissipation. You know, you're using marital assets for a non-marital purpose at a time that the marriage is undergoing a breakdown. And so they'll put it back on the balance sheet as though it still exists and allocated to you as though it exists.

So they're they're making an end run around the proof requirement because they don't understand it.

Ryan Kalamaya (23:36)
I agree. We have the same concept dissipation. I've had various podcast episodes explaining it or we've mentioned it. One thing I think is interesting is that, okay, so Bitcoin was at an all time high in October of 2025. We're recording this in the end of January, 2026. Bitcoin's off 30%. And so the issue is during, if you have a divorce in my world,

generally recommend divorces or observe that divorces take nine to 12 months on average. And often for the complex cases, it's going to be more than a year. So you have a lot of volatility. mean, Bitcoin has in particular, but then you also have Ethereum and the kind of altcoins as they're known. The volatility is even greater. And there's case law that, mean, Melanie could say, well, you invested in Bitcoin.

And now it's off 30%. And so you've dissipated 30%. And in Colorado, it's usually an intent based, like where if there was Bitcoin in a exchange and then it was removed intentionally by Eric and now 30 % is missing. That is a materially different scenario. That's dissipation as opposed to, well, the dissipation has all been accounted for. We were recently

you know, that all the Bitcoin has been accounted for. It's just it's down substantially. And those market losses are something that are treated differently than just intentionally taking it. And that kind of relates to the Swiss bank concept that we talked about. What you are referencing in dissipation is someone essentially taking something and either trying not to report it.

or you know, saying, it's lost, I've lost the wallet. And I think that that's a little bit different than, not a little bit, it's materially different than the market's just down.

Jonathan Steele (25:30)
That's right. mean, we've dealt with the case law here is more on like people that went into day trading and they lost big money. So the diminution in value of like the investment portfolios, that's what our case law is more on than Bitcoin losing money or other coins. But I think that's just a function of time. I think it's only a matter of time before we start to have more case law on dissipation and coins losing value. It's the same sort of argument.

And, you know, what I've always found interesting is that if the coins appreciated in value, Melanie's not complaining. She's asking for her half of the winnings. But if it goes down, she doesn't want to share in the losses.

Ryan Kalamaya (26:10)
I've had that case and that absolutely was the argument is, you know, I want you out of Bitcoin. I don't like this. This is making me uncomfortable. And then it went up right after the election. And it was no, we didn't hear any more arguments about that. But as you know, know, crypto wins itself. There is certainly the casino and gambling element of that. Same thing. I mean,

America, we love to gamble. mean, if you look at the statistics, prediction markets, sports gambling, is endemic. The stock market in and of itself is a form of gambling. so, yes, there I think that there is absolutely case law that's going to develop on that gambling component within Bitcoin, especially when you get into the altcoins where someone goes and wants to, they really

you know, think that they can make, you know, easy money during, during the divorce that they might kind of have their back up against the wall or, and then they lose a bunch of money. And that is certainly rife in that ⁓ industry as there are other industries and other risks. So yeah, fascinating issues as they develop. Jonathan, thank you for joining us and lending your, your knowledge.

For people that want to learn more about you, we'll have your info in the show notes where people can find you. But what's the best way to reach out if they want to learn more about the issues that we discussed on this episode?

Jonathan Steele (27:38)
So I have my firm website that you can reach me through and that's beermannlaw.com. But I also have a personal website that has all my contact information. That's steelefamlaw.com. And hopefully you can put that in the show notes so I don't have to spell it for the listeners, but it has all my contact information. It also has a lot of content, blog posts and things that I've written about this subject matter. So hopefully it's helpful.

Ryan Kalamaya (28:03)
Indeed, I might go check it out right after we close out. But Jonathan, thanks for joining us and thank you listeners for fishing out this episode. If you're here in this, that means you've reached the end. I hope you've learned something and thanks for joining us. And until next time, ⁓ Ryan Kalamea on behalf of DeForce Altitude. Thanks.