Bitcoin News Today: FBI Case Warns Crypto Owners: Delayed Claims Risk Permanent Loss

The U.S. Court of Appeals for the Eleventh Circuit has ruled that the FBI is not liable for wiping a hard drive containing over 3,400 bitcoins during a criminal investigation, dismissing a lawsuit by Michael Prime, a Florida man who claimed the lost cryptocurrency was worth approximately $354 million, according to a Coinotag article.

Prime was arrested in 2019 for identity theft and fraud, and during a search of his property, the FBI seized a hard drive. The agency later wiped the device as part of standard protocol for handling seized electronic evidence. However, Prime argued that the FBI destroyed the drive without proper authorization, erasing access to what he claimed were 3,443 bitcoins. The court rejected this claim, citing inconsistencies in Prime's statements and an unreasonable delay in asserting ownership.

Prime initially disclosed minimal cryptocurrency holdings during his plea deal in 2019, stating he owned only $200 to $1,500 in bitcoin. After his release from prison in 2022, he retroactively claimed ownership of the 3,443 bitcoins, a discrepancy the court found "prejudicial to the government's ability to respond," the Coinotag article noted. Judges emphasized that Prime's delayed assertion of rights—nearly three years after the seizure—barred legal recourse, the Coinotag article added. The ruling also noted that even if the bitcoins existed, granting relief would be inequitable given Prime's prior denials, as the Coinotag article explained.

The FBI defended its actions, stating that wiping unclaimed devices is standard practice to protect sensitive data and prevent misuse. The agency highlighted that Prime never provided evidence of ownership or requested preservation of the drive before its destruction, the Coinotag article reported.

The case has broader implications for cryptocurrency holders. Blockchain analytics firm Glassnode estimates that 1.46 million bitcoins—nearly 7% of the total supply—are permanently lost due to misplaced or destroyed private keys. Chainalysis previously reported that up to 3.7 million BTC (17.5% of the supply) may be irretrievable, as noted in a Lookonchain report. These figures underscore the fragility of digital asset ownership, where cryptographic keys are the sole gateway to funds.

Legal experts say the ruling reinforces the importance of transparency during federal investigations. "Prompt and consistent disclosure of assets is critical," said a spokesperson for the Blockchain Association. "Failure to do so can result in permanent forfeiture, as seen in this case."

Prime's lawsuit was one of several high-profile disputes over lost or seized cryptocurrency. The court's decision aligns with precedents emphasizing equitable principles in property claims, particularly when government actions are conducted in good faith.

As the value of bitcoin continues to rise, the case serves as a cautionary tale for investors. Secure key management and timely legal action remain essential to protecting digital assets from irreversible loss.