A federal appeals court determined that the FBI cannot be blamed for wiping a drive allegedly holding 3,400 Bitcoin, as the convicted owner failed to disclose his crypto holdings.
FBI Cleared of Responsibility in Bitcoin Hard Drive Case
A U.S. federal appeals court has ruled that the Federal Bureau of Investigation (FBI) is not at fault for erasing a hard drive that reportedly contained more than 3,400 Bitcoin, now valued at over $345 million. The court found that the driveâs owner, Michael Prime, failed to inform authorities that he possessed such assets at the time of his conviction.
Prime, who was convicted of identity theft, device fraud, and firearm possession, sought the return of his seized property after his release from prison in July 2022. However, the FBI had already wiped the hard drive as part of standard evidence-handling procedures, which Prime claimed was unlawful.
âFor 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,â the Eleventh Circuit Court of Appeals wrote. âOnly later did Prime claim to be a bitcoin tycoon.â
Court Rejects Claim of Wrongful Destruction
The three-judge panel unanimously upheld the lower courtâs decision, stating that Primeâs delay in asserting ownership of the Bitcoin made his lawsuit invalid. The judges further questioned whether the cryptocurrency ever existed, noting, âEven if the bitcoin existed â and thatâs a big if â awarding Prime an equitable remedy here would be inequitable.â
Records show that in February 2020, Prime told the government he owned between $200 and $1,500 in Bitcoin, contradicting his later claim of owning 3,443 BTC. The court dismissed his attempt to reinterpret this figure, calling his explanation âpreposterous,â since Bitcoinâs price at the time exceeded $10,000 per coin.
The case underscores the irreversible nature of cryptocurrency loss. A cryptographic key is the only means of accessing Bitcoin stored on a physical or digital wallet. Losing that key renders the funds permanently inaccessible.
According to Glassnode data, about 1.46 million BTCâroughly 7% of Bitcoinâs total supplyâis presumed lost forever. Some studies estimate the figure could be as high as 3.7 million BTC, representing over 17% of all Bitcoin in existence.
The ruling serves as a cautionary tale for cryptocurrency holders: failing to disclose or properly secure digital assets can result in irretrievable financial loss.
Disclaimer
This content is for informational purposes only and does not constitute financial, investment, or legal advice. Cryptocurrency trading involves risk and may result in financial loss.