A U.S. appeals court has determined that the FBI cannot be held responsible for wiping a hard drive containing more than 3,400 Bitcoin, now valued at approximately $345 million, after its convicted owner, Michael Prime, did not inform authorities about the Bitcoin.
Court rejects lawsuit over lost bitcoin
The Eleventh Circuit Court of Appeals ruled on Tuesday that Prime could not proceed with his lawsuit against the government for deleting access to the bitcoin, as he repeatedly denied owning such an amount during legal proceedings. The panel stated:
“For years, Prime denied that he had much bitcoin at all. And bitcoin was not on the list when he sought to recover missing assets after his release from prison. Only later did Prime claim to be a bitcoin tycoon.”
The court agreed with a lower court that Prime’s delay in asserting ownership was unreasonable, and even questioned whether the bitcoin existed at all.
Conflicting disclosures undermine claim
Court records reveal that Prime initially claimed to possess around 3,500 bitcoin prior to his 2019 plea deal on charges of device fraud, identity theft, and illegal firearm possession.
However, in 2020, he reported to authorities a much lower figure—between $200 and $1,500 worth of bitcoin.
The judges noted Prime later tried to justify this discrepancy by arguing he was referencing the price per bitcoin, a claim the court dismissed as “preposterous.”
Lost bitcoin a widespread issue
Losing access to cryptographic keys means losing the bitcoin itself.
Data from Glassnode estimates that roughly 1.46 million BTC—about 7% of bitcoin’s total 21 million supply—is likely lost forever.
Other estimates, such as Chainalysis, suggest the figure could be as high as 3.7 million BTC, over 17.5% of the total supply.
Appeals court upholds fbi procedures
After serving two years in prison, Prime attempted to recover the hard drives, but the Orlando federal court denied his request as the devices had already been destroyed according to FBI protocols. The appeals court found no wrongdoing by the FBI, emphasizing that Prime’s own lack of timely disclosure was the decisive factor.
