Judges Rule FBI Not Liable for Wiped Hard Drive Containing…

A federal appeals court has determined that the FBI cannot be held responsible for wiping a hard drive that allegedly contained over 3,400 Bitcoin, now valued at approximately $345 million. The ruling stems from a lawsuit filed by Michael Prime, who claimed the government destroyed his access to a significant cryptocurrency fortune.

Key Takeaways

A man convicted of identity theft lost his lawsuit against the government.
He claimed the FBI wiped a hard drive containing over 3,400 Bitcoin.
Judges cited his inconsistent claims about Bitcoin ownership as a reason for dismissal.

The Case Against the FBI

Michael Prime, after being released from prison in July 2022, requested the return of a hard drive he claimed held a substantial amount of Bitcoin. The FBI had previously erased the drive as part of its standard procedures. Prime argued this action was illegal and sought compensation for the lost cryptocurrency.

Judicial Reasoning

A three-judge panel at the Eleventh Circuit Court of Appeals ruled against Prime. The judges pointed to Prime's own history of denying significant Bitcoin ownership. They noted that for years, Prime downplayed his cryptocurrency holdings and did not list Bitcoin among the assets he sought to recover after his release. The court stated that Prime only later began referring to himself as a "bitcoin tycoon."

Inconsistent Claims and Unreasonable Delay

The court agreed with a lower court's decision, finding that Prime's delay in asserting his claim to the Bitcoin was unreasonable. The judges wrote that "even if the bitcoin existed—and that’s a big if—awarding Prime an equitable remedy here would be inequitable."

According to court documents, Prime had initially claimed to own "approximately 3,500 Bitcoin" before accepting a plea deal in November 2019 for charges including device fraud and identity theft. However, following his plea, his reported holdings drastically changed. In a February 2020 financial disclosure, Prime stated he owned "only $200 to $1,500 in bitcoin," later telling his probation officer these were his "only remaining asset."

Valuation Discrepancies

When questioned about the discrepancy between his earlier claims and later disclosures, Prime attempted to explain that he was reporting the market value of a single Bitcoin at the time, which he claimed was between $200 and $1,500. The judges dismissed this explanation as "preposterous," noting that Bitcoin's value in February 2020 often exceeded $10,000.

Bitcoin Loss and Recovery Challenges

The case highlights the challenges associated with cryptocurrency recovery. Accessing Bitcoin stored on physical devices like hard drives requires a cryptographic key. Losing this key, or the device itself, means losing access to the funds. Estimates suggest that millions of Bitcoin may be permanently lost due to lost keys or inaccessible storage.

Sources

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Judges Rule FBI Not Liable for Wiped Hard Drive Containing Millions in Bitcoin