Bitcoin Hard Drive Lawsuit: Court Rules Against Plaintiff
Background to the Bitcoin Hard Drive Lawsuit
An appeals court has upheld a previous decision barring Michael Prime, a man convicted of identity theft, from suing the US government after the FBI wiped a hard drive he claims held more than 3,400 Bitcoin. The Eleventh Circuit Court of Appeals ruled on June 25, 2024, that Prime cannot seek compensation for the loss of a cryptographic key to an estimated 3,443 Bitcoin (BTC), now valued at approximately $345 million. The ruling agreed with a lower court, finding Prime’s delay and inconsistency in asserting ownership over the Bitcoin undermined his case. Reporting via Cointelegraph.
Judges Reject Ownership and Timeliness Claims
Prime, who was released from prison in July 2022, requested the return of a hard drive he said stored the Bitcoin. The FBI had already wiped the device following standard evidence handling procedures. The court pointed out Prime’s inconsistent statements on Bitcoin holdings, noting in the decision, “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 much later did Prime claim ownership of the substantial sum.
The judicial panel’s opinion stated that when negotiating a plea for charges including device fraud and identity theft in November 2019, Prime said he had roughly 3,500 Bitcoin. However, after the plea, he significantly downplayed his holdings, reporting between “$200 to $1,500 in bitcoin” to government officials in early 2020. The court rejected his explanation for this discrepancy, noting, “We don’t buy it,” as Bitcoin’s price at the time well exceeded the values he claimed.
Market Impact and Lost Bitcoin Estimates
The loss of access to Bitcoin on physical devices like hard drives is a recognized issue in the cryptocurrency world, as digital assets can be irretrievable without the correct cryptographic keys. According to blockchain analytics firm Glassnode, nearly 1.46 million BTC, equivalent to almost 7% of Bitcoin’s maximum 21 million supply, may be lost forever. Estimates from 2018 by Chainalysis suggested this figure could be as high as 3.7 million BTC, or over 17.5% of the total supply.
This case highlights the legal and practical risks surrounding cryptocurrency self-custody and asset recovery after law enforcement action or criminal conviction. The appeals court concluded that “even if the bitcoin existed—and that’s a big if—awarding Prime an equitable remedy here would be inequitable.”
What’s Next for Lost Crypto Cases?
With the Bitcoin hard drive lawsuit now resolved at the appeals level, Prime’s legal avenues appear exhausted. The case emphasizes the importance of transparency regarding cryptocurrency holdings in legal proceedings and the challenges of proving digital asset ownership after forfeiture events.
Court rulings like this set precedent for similar lawsuits as authorities increasingly encounter digital currency in criminal investigations. The ongoing issue of permanently lost Bitcoin contributes to the scarcity narrative in the cryptocurrency market, fueling debate about asset management and law enforcement’s role.
For more industry news, visit the Cryptocurrency section on Vizi.com.
