Crypto News: Man Sues FBI For Wiping Hard Drive With $345 Million BTC and Loses

A US appeals court has ruled that the FBI is not responsible for wiping a hard drive allegedly containing over 3,400 BTCs (worth $345 million).

A US appeals court has ruled that the FBI cannot be held liable for wiping a hard drive allegedly containing 3,443 bitcoins.

These coins are now worth about 345 million dollars, and the decision ends a long legal fight brought by Michael Prime, a Florida man convicted of identity theft and fraud.

Prime argued that the FBI erased the device without permission after seizing it during a 2019 investigation. He claimed the drive stored his bitcoin fortune, which he discovered was gone after his release from prison in 2022. 

However, judges said his claims came too late and lacked credibility, leading to the dismissal of his lawsuit.

Contradictory Statements Weakened the Bitcoin Lawsuit

Court documents show that when Prime reached a plea deal in 2019, he reported owning only between $200 and $1,500 in Bitcoin. Yet years later, he claimed the FBI had destroyed access to over 3,400 bitcoins. 

The court noted that this drastic change in his statements damaged his credibility.

The Eleventh Circuit judges found that Prime’s delay in asserting ownership (nearly three years after the hard drive was wiped) made his Bitcoin lawsuit invalid.

FBI dismisses Prime’s claims and says that they lack credibility | source- US Court of Appeals

Prime later argued that his earlier statements referred to bitcoin’s market value rather than the number of coins. 

The panel rejected this explanation and called it “preposterous” since bitcoin traded above ten thousand dollars in early 2020.

FBI Followed Standard Procedure, Court Says

The FBI stated that wiping electronic devices is part of its standard protocol once evidence is no longer needed. 

This process helps to prevent unauthorised access to sensitive information. The agency also said Prime never asked for the drive’s preservation or provided proof of ownership before its destruction.

According to the ruling, the court agreed that the FBI acted in good faith and that Prime failed to meet the requirements needed to reclaim property. His bitcoin lawsuit was therefore dismissed with prejudice and ended any chance of appeal.

A spokesperson for the Blockchain Association said that the decision shows how vital transparency is when dealing with federal authorities. 

Millions of Bitcoins Lost Forever

The Prime case adds to a list of incidents showing how fragile crypto ownership can be. 

Blockchain data firm Glassnode estimates that about 1.46 million bitcoins (around 7 percent of the total supply) is currently gone forever.

Chainalysis says that 17% of all Bitcoin is currently lost | source: Chainalysis

Chainalysis says that this figure is even higher, and up to 3.7 million bitcoins may be gone forever due to forgotten passwords, lost hardware or destroyed private keys. That amounts to more than 17 per cent of all coins ever created.

Once a private key is lost, there is no recovery method. This is part of what makes bitcoin secure but also unforgiving. 

As experts explain, “owning bitcoin means taking complete responsibility for safety.”

Lessons from the Bitcoin Lawsuit

The FBI’s victory in this bitcoin lawsuit shows a consistent trend in how courts handle crypto disputes. Legal experts say that the US courts are becoming more strict in their requirements for proof of ownership before granting any relief.

Prime’s delayed claim, coupled with his earlier denial of large holdings undermined his case from the start. Judges said his actions were inconsistent and unfair to the government, which had already followed due process.

As Bitcoin’s price continues to climb, similar claims are likely to continue showing up. However, this ruling shows that the courts will be watching them closely.

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