U.S. Appeals Court Rejects Bitcoin Lawsuit Over Seized Hard Drive

According to Cointelegraph, a U.S. appeals court has dismissed a lawsuit filed by Michael Prime, a man convicted of identity theft, who alleged that the FBI illegally wiped a hard drive containing over 3,400 Bitcoin. The Eleventh Circuit Court of Appeals ruled that Prime cannot sue the government for the loss of access to approximately 3,443 Bitcoin, currently valued at $345 million, as he had previously denied owning such a substantial amount of cryptocurrency. Prime, who was released from prison in July 2022, requested the return of the hard drive, but the FBI had already wiped it as part of its standard procedures. The court found Prime's delay in asserting ownership of the Bitcoin unreasonable, stating that even if the Bitcoin existed, granting Prime an equitable remedy would be unjust. The judges noted that Prime initially claimed to own only $1,500 in Bitcoin, contradicting his later assertions of being a Bitcoin tycoon. The court's opinion highlighted inconsistencies in Prime's claims, noting that before his plea deal in November 2019, he claimed ownership of approximately 3,500 Bitcoin. However, after the plea, Prime reported owning only $200 to $1,500 in Bitcoin in his financial disclosure to the government in February 2020. He later informed the probation office that these holdings were his only remaining asset. The court dismissed Prime's explanation that he was reporting the market value of a single Bitcoin at the time, which he claimed was between $200 and $1,500, as Bitcoin's value exceeded $10,000 during that period. The case underscores the importance of cryptographic keys, which are essential for accessing Bitcoin stored on physical devices like hard drives or wallets. Losing these keys results in the permanent loss of access to the funds. Data from Glassnode indicates that approximately 1.46 million BTC, or nearly 7% of Bitcoin's total supply, is likely lost forever. Chainalysis estimated in 2018 that the amount of permanently lost Bitcoin could be as high as 3.7 million BTC, representing over 17.5% of its total supply.