FBI Cannot Be Held Responsible For Wiping Hard Drive Containing $345M In BTC

An individual convicted of identity theft by US authorities has lost his lawsuit against the government in a US appeals court. The man claimed his hard drive with over 3,400 BTC was seized and wiped by the FBI. 

The appeals court ruled that the FBI cannot be held at fault for wiping the hard drive, as the convicted owner failed to inform the government that he was the owner of the tokens. 

FBI Not Responsible 

A three-judge panel at the Eleventh Circuit Court of Appeals has ruled that Michael Prime cannot sue the government over the loss of a key to access 3,443 BTC, worth $45 million, as he had previously claimed he did not own that amount of crypto. Prime had asked a court, upon his release from prison in July 2022, for a hard drive containing the assets to be returned. However, the FBI had wiped the hard drive as part of its standard procedures. The judges 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 judges agreed with a lower court that Prime’s delay in claiming his rights to the Bitcoin was unreasonable, barring his suit. The judges added, 

“Even if the bitcoin existed—and that’s a big if—awarding Prime an equitable remedy here would be inequitable.”

False Claims

According to the judges, Prime initially claimed to own approximately 3,500 BTC before striking a plea deal in November 2019, admitting to device fraud, identity theft, and illegally possessing a firearm. However, the judges noted that following the plea deal, Plea changed his claims, stating he did not own a significant amount of cryptocurrency. 

“But after the plea, Prime changed his tune—he no longer claimed to own a significant amount of cryptocurrency.”

They added that according to Prime’s financial disclosure to the government, he reportedly owned only “$200 to $500 in Bitcoin,” later telling the probation office that the holdings were his only remaining asset. Prime served two years in prison before being transferred to a halfway house, after which he sued to have the hard drives returned to him. However, an Orlando federal court denied Prime’s request. 

Lost Bitcoin 

According to the court, Prime attempted to explain his lower figure by claiming he was reporting the market value of a single Bitcoin at the time was between $200 and $1,500. The judges stated, 

“We don’t buy it. The valuation is preposterous as Bitcoin was worth over $10,000 at times in February 2020.”

Bitcoin stored on physical devices can only be accessed by a cryptographic key. If the key is lost, the funds are as well. According to Glassnode, 1.46 million BTC, nearly 7% of its supply, is likely lost forever. However, Chainalysis reported in 2018 that the amount of BTC lost forever could be as high as 3.7 million BTC.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.