Appeals Court Dismisses $354 Million Bitcoin Recovery Lawsuit
A federal appeals court has rejected a Florida prisoner’s attempt to recover over $354 million in Bitcoin that he claimed was lost when authorities destroyed a hard drive seized during his 2019 arrest. The Eleventh Circuit Court ruled that Michael Prime waited too long to make his claim, leaving the government unable to return the destroyed device.
The Legal Battle Over Lost Bitcoin
Michael Prime, sentenced in 2020 to more than five years for access-device fraud, aggravated identity theft, and illegal firearm possession, claimed after his release that the destroyed hard drive contained cryptographic keys to approximately 3,443 Bitcoin. However, the court found his timing and contradictory statements undermined his case.
Conflicting Statements and Legal Doctrine
Circuit judges noted that Prime had repeatedly told investigators, probation officers, and sentencing judges that he owned little or no cryptocurrency. “For years, Prime denied that he had much Bitcoin at all,” the ruling stated. “And Bitcoin was not on the list when he sought to recover missing assets after his release from prison.”
Government’s Position and Evidence Destruction
Federal agents, relying on Prime’s early denials, ended their search for Bitcoin and subsequently destroyed the seized devices. The court determined that Prime’s “inexcusable delay” had “prejudiced the government” and that compensation would be inequitable “even if the Bitcoin existed.”
The Reality of Lost Bitcoin
This case highlights the permanent nature of cryptocurrency loss when private keys are destroyed. Bitcoin itself exists on the blockchain, but without the cryptographic keys stored on devices like hard drives, the assets become effectively inaccessible.
The Scale of Lost Bitcoin
According to a 2025 report from Bitcoin financial institution River Financial, between 2.3 million and 4 million BTC (11-18% of total supply) are permanently lost. Approximately 3.8 million BTC are linked to wallets inactive for over a decade, with the effective circulating supply estimated between 15.8 million and 17.5 million BTC.
Legal Precedent and Future Implications
The court’s ruling establishes important precedent regarding cryptocurrency recovery claims and the legal doctrine of laches, which bars claims when plaintiffs unreasonably delay filing and prejudice defendants. This case underscores the importance of timely and consistent claims regarding digital asset ownership in legal proceedings.
