Identity Theft Convict Loses Lawsuit Over FBI Seizure of 3,400 Bitcoin Hard Drive

Bitcoin Lawsuit Fails:

In a recent development, a lawsuit filed by a man convicted of identity theft against the US government has been dismissed. The plaintiff, Michael Prime, alleges that the Federal Bureau of Investigation (FBI) seized and wiped his hard drive containing over 3,400 Bitcoin (BTC). These cryptocurrencies are currently worth an estimated $345 million USD.

A three-judge panel at the Eleventh Circuit Court of Appeals rejected the lawsuit on Tuesday, stating that Prime cannot sue the government over the loss of the key to access these cryptocurrencies. This decision was based on the fact that Prime had previously claimed not to own that much Bitcoin.

Conflicting Claims of Bitcoin Ownership:

After being released from prison in July 2022, Prime requested the court to return his hard drive containing the Bitcoin. However, the FBI had wiped the drive as part of its standard procedures, which Prime considered illegal. The judges argued that Prime had denied owning much Bitcoin for years, and Bitcoin was not listed among the missing assets he sought to recover after his release. They concluded that Prime's claim to be a Bitcoin tycoon only surfaced later.

The court agreed with the lower court's decision that Prime's delay in claiming the Bitcoin was unreasonable and prevents his lawsuit. They added that even if the Bitcoin existed - which is doubtful - granting Prime an equitable remedy would be unjust.

Inconsistent Statements:

According to the panel's opinion, Prime claimed to own "approximately 3,500 Bitcoin" before entering a plea agreement in November 2019 to admit to device fraud, identity theft, and illegal possession of a firearm. However, after the plea, Prime changed his tune and no longer claimed to own a significant amount of cryptocurrency. In February 2020, Prime reported to the government in his financial disclosure that he only owned "between $200 and $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, Prime filed a lawsuit to have the hard drives returned to him, but a federal court in Orlando denied the request because they had already been destroyed. Prime attempted 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."

Court Rejects Prime's Explanation:

The judges rejected Prime's explanation, calling the valuation "preposterous" since Bitcoin was worth over $10,000 at times in February 2020. It is important to note that 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 suggests that approximately 1.46 million Bitcoin, or about 7% of the total supply of 21 million, may be lost forever. However, estimates vary, with Chainalysis reporting in 2018 that the amount of permanently lost Bitcoin could be as high as 3.7 million Bitcoin, which is over 17.5% of the total supply.