A man convicted of identity theft, who claims his hard drive with over 3,400 Bitcoin was seized and wiped by the FBI, has lost his lawsuit against the government in a US appeals court.
A three-judge panel at the Eleventh Circuit Court of Appeals found on Tuesday that Michael Prime can’t sue the government over the loss of a key to access around 3,443 Bitcoin (BTC), now worth $345 million, as he previously claimed he didn’t own that amount of crypto.
Prime asked a court after he was released from prison in July 2022 for a hard drive containing the Bitcoin to be returned, but the FBI had wiped it as part of its standard procedures, which Prime claimed was illegal; the judges said.
“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,” the judges wrote. “Only later did Prime claim to be a bitcoin tycoon.”
They agreed with a lower court that Prime’s delay in claiming a right to the Bitcoin was unreasonable and bars his suit, adding that “even if the bitcoin existed—and that’s a big if—awarding Prime an equitable remedy here would be inequitable.”
Prime claimed to own $1,500 in Bitcoin, judges say
According to the panel’s opinion, Prime had claimed to own “approximately 3,500 Bitcoin” before he struck a plea deal in November 2019 to admit to device fraud, identity theft, and illegally possessing a firearm.
“But after the plea, Prime changed his tune—he no longer claimed to own a significant amount of cryptocurrency,” the judges wrote.
The panel said that in February 2020, Prime’s financial disclosure to the government reported he owned “only $200 to $1,500 in bitcoin” and later told the probation office that the holdings were “his only remaining asset.”
After serving two years in prison and being transferred to a halfway house, the opinion said Prime sued to have the hard drives returned to him, but an Orlando federal court denied the request as they had already been destroyed.
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The appeals court opinion said Prime tried to “explain away” his lower figure by claiming that he was reporting that the “market value of a single bitcoin at that time was between $200 and $1,500.”
“We don’t buy it,” the judges wrote, adding that the valuation “is preposterous” as Bitcoin was worth over $10,000 at times in February 2020.
A cryptographic key is the only way to access Bitcoin stored on a physical device, such as a hard drive or wallet, and losing it also means losing access to the funds inside.
Glassnode data shows that around 1.46 million BTC, or nearly 7% of its total 21 million supply, is likely lost forever.
Estimates vary, however, as Chainalysis reported in 2018 that the amount of Bitcoin permanently lost could be as high as 3.7 million BTC, which is over 17.5% of its total supply.
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