A U.S. appeals court has ruled that the Federal Bureau of Investigation (FBI) cannot be held accountable for wiping a hard drive containing more than 3,400 Bitcoin (BTC), now worth roughly $345 million. The decision came after a panel of three judges found that the claimant, Michael Prime, failed to disclose the Bitcoin’s existence when it mattered most — during his criminal proceedings and subsequent asset recovery request.
According to court documents released on Tuesday by the Eleventh Circuit Court of Appeals, Prime cannot sue the government over the loss because he repeatedly denied owning a significant amount of cryptocurrency before and during his imprisonment.
“For years, Prime denied that he had much bitcoin at all,” the judges wrote. “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.”
How the Dispute Began
Prime was convicted in 2019 after pleading guilty to identity theft, device fraud, and illegal firearm possession. During his plea and sentencing, he told authorities he owned a small amount of Bitcoin — valued at just $200 to $1,500.
In February 2020, he filed a financial disclosure form confirming this limited holding, describing it as his “only remaining asset.” When he was released from prison in July 2022, Prime requested that the FBI return several seized items, including a hard drive he claimed held the private keys to around 3,443 BTC.
By that time, the FBI had already wiped the drive, following its standard procedure for handling confiscated equipment in criminal cases. Prime sued the U.S. government, arguing that the drive’s destruction was illegal and deprived him of access to his Bitcoin holdings.
Judges Reject Prime’s Lawsuit
The appellate judges sided with the government, affirming that Prime’s claim lacked credibility and was filed too late. They agreed with a lower court’s ruling that Prime’s delay in asserting ownership “was unreasonable” and legally bars him from pursuing compensation.
“Even if the bitcoin existed — and that’s a big if — awarding Prime an equitable remedy here would be inequitable,” the judges said.
The court also dismissed Prime’s attempt to reinterpret his earlier financial disclosures. He had argued that his 2020 statement referred to Bitcoin’s market price per coin, not his total holdings. The panel rejected this explanation as “preposterous,” noting that Bitcoin traded above $10,000 for most of that period.
Legal and Technical Context
This case underscores how digital assets can complicate legal procedures involving seized property. Since Bitcoin ownership depends on private cryptographic keys, losing access to the device or storage medium holding those keys effectively renders the funds inaccessible — a situation that no government agency can easily remedy.
The FBI’s standard asset-handling policy involves wiping electronic storage devices to protect sensitive or illegal data, especially when their ownership is contested or undisclosed. The appeals court ruled that the agency followed proper protocol and that no misconduct occurred.
How Much Bitcoin Is Lost Forever?
Prime’s case highlights a broader issue — lost Bitcoin. According to data from Glassnode, an estimated 1.46 million BTC, nearly 7% of the total 21 million supply, is considered permanently lost due to forgotten keys or damaged storage.
Meanwhile, Chainalysis estimated in 2018 that as many as 3.7 million BTC, representing over 17% of Bitcoin’s total supply, could be irretrievable. With current prices above $100,000, these losses translate into hundreds of billions of dollars locked out of circulation forever.
Final Verdict
The court’s ruling closes the door on Michael Prime’s attempt to recover what he claims was a fortune in Bitcoin. Judges concluded that his inconsistent statements, lack of proof, and delayed claims made his lawsuit untenable.
The FBI, for its part, was found to have acted appropriately within established procedures. As the judges summarized, Prime’s own actions — not the government’s — led to the loss of access to his alleged digital wealth.
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