A convicted identity thief who claimed the FBI destroyed his $345 million Bitcoin fortune has lost his lawsuit against the U.S. government after a federal appeals court pointed to one glaring problem: his own words. A three-judge panel at the Eleventh Circuit Court of Appeals ruled Tuesday that Michael Prime cannot sue the government, primarily because he had repeatedly told authorities he owned almost no cryptocurrency.
Prime alleged that agents illegally wiped a hard drive seized during his 2019 arrest, which he claimed held the private keys to 3,443 Bitcoin. But the court ruled that his “unreasonable” delay in claiming the assets, and his contradictory statements, made his lawsuit invalid. “Only later,” the judges wrote, “did Prime claim to be a bitcoin tycoon.”
A Tale of Two Claims
The case hinges on a massive discrepancy in Prime’s own story. Before he was convicted, he had reportedly told investigators he possessed approximately 3,500 Bitcoin. However, after he struck a plea deal in November 2019 for device fraud, identity theft, and illegal firearm possession, the court opinion noted, “Prime changed his tune.”
In a February 2020 financial disclosure to the government, Prime reported that he owned “only $200 to $1,500 in bitcoin.” He later affirmed this to the probation office, stating the small holding was his “only remaining asset.” Relying on these statements, the FBI ceased its search for any crypto assets and, following standard procedure, eventually destroyed the seized hard drive.
A ‘Preposterous’ Explanation
Prime, who was released from prison in July 2022, only sued for the hard drive’s return after it had been wiped. In court, he tried to “explain away” the $1,500 figure that doomed his case. He claimed he wasn’t reporting his total holdings, but rather that the “market value of a single bitcoin at that time was between $200 and $1,500.”
The three-judge panel flatly rejected this. “We don’t buy it,” the judges wrote in their opinion, calling the valuation “preposterous.” They noted that in February 2020, when Prime made his disclosure, Bitcoin was trading for over $10,000. The court concluded that even if the $345 million in Bitcoin did exist—which they called “a big if”—awarding Prime an equitable remedy would be “inequitable.”
The Criminal Case
Michael Prime’s 2019 arrest was not for a minor offense. When deputies searched his home, they found a trove of evidence related to a sophisticated identity theft operation. This included over 1,700 counterfeit credit and debit cards, 1,490 blank cards, 37 counterfeit driver’s licenses, and templates for fake social security cards.
Prime admitted to making counterfeit credit cards and IDs, as well as building untraceable firearms. He confessed that he sold the items on the dark web and accepted Bitcoin as payment, which is what led to the initial claim of him owning a large crypto stash. After his plea deal, he was sentenced to 65 months in prison.
The Nature of a Lost Key
The case demonstrates how unforgiving self-custody is in cryptocurrency. The hard drive did not hold the Bitcoin; it allegedly held the cryptographic key, a complex password that is the only way to access and control cryptocurrency on the blockchain. Once that key is lost or destroyed, the associated Bitcoin is permanently lost and inaccessible.
Another Drop in the Lost Bitcoin Ocean
If Prime’s assertion holds, his 3,443 BTC would now be another entry in the millions of Bitcoin that are thought to be permanently lost. We cannot know the actual number, but blockchain analytics company Glassnode puts the lost Bitcoin number at about 1.46 million – around 7% of the total 21 million.
Other estimates are even greater. A Chainalysis report from 2018 suggested the number of permanently lost Bitcoin could be as high as 3.7 million BTC, which would represent over 17.5% of the total supply. In this case, however, the court has ruled that the loss—if it ever truly existed—is not the fault of the FBI, but of the claimant himself.
