A man convicted of identity theft who claimed the FBI seized and wiped his hard drive containing over 3,400 Bitcoin has lost his lawsuit against the government in a U.S. appeals court.
The Eleventh Circuit Court of Appeals ruled on Tuesday that Michael Prime cannot sue over the loss of a key to access roughly 3,443 Bitcoin—now worth $345 million—because he previously denied owning that amount of cryptocurrency.
After his release from prison in July 2022, Prime asked the court to return the hard drive, but the FBI had wiped it as part of its standard procedures. He argued this was illegal, but the judges disagreed.
“For years, Prime denied that he had much Bitcoin at all. Bitcoin was not listed when he sought to recover missing assets after his release,” the court wrote. “Only later did Prime claim to be a Bitcoin tycoon.”
The court sided with a lower court, saying Prime’s delayed claim was unreasonable and barred his lawsuit. They added, “Even if the Bitcoin existed—and that’s a big if—awarding Prime an equitable remedy here would be inequitable.”
Before his plea deal in November 2019 for device fraud, identity theft, and illegal firearm possession, Prime had claimed to own about 3,500 Bitcoin. But afterward, he drastically reduced his reported holdings.
In February 2020, his financial disclosure listed only $200 to $1,500 in Bitcoin, which he later told probation officers was his “only remaining asset,” according to the judges.
After serving two years in prison and moving to a halfway house, Prime sued to have the hard drives returned. However, an Orlando federal court denied his request, as the drives had already been destroyed.
The appeals court noted that Prime tried to justify his low reported Bitcoin holdings by claiming he was calculating based on a market value of $200 to $1,500 per coin at the time.
“We don’t buy it,” the judges wrote, calling the valuation “preposterous,” since Bitcoin was trading above $10,000 at points in February 2020.
Because Bitcoin stored on a physical device—like a hard drive or wallet—can only be accessed with a cryptographic key, losing that key effectively means losing the funds permanently.
According to Glassnode data, about 1.46 million BTC—nearly 7% of the total 21 million supply—is likely lost forever. Estimates vary, however, with Chainalysis reporting in 2018 that as much as 3.7 million BTC, over 17.5% of the total supply, could be permanently gone.
