Appeals Court Rejects Prisoner's Lawsuit Over Alleged $354M Bitcoin Loss

A federal appeals court has rejected a Florida man’s attempt to recover more than $354 million worth of Bitcoin. The man, Michael Prime, alleged that the Bitcoin was lost when authorities destroyed a hard drive seized during his 2019 arrest for counterfeiting and identity theft. On Tuesday, the Eleventh Circuit upheld a lower court's decision denying Prime’s motion for the return of property, arguing that he waited too long to make his claim, making it impossible for the government to return the destroyed hard drive.

The court highlighted that Prime had repeatedly denied owning significant amounts of Bitcoin. These statements were made to investigators, probation officers, and even a sentencing judge, contradicting later claims that he held close to 3,443 Bitcoin. Prime only asserted that he was a "Bitcoin tycoon" years after his release from prison. Based on his earlier claims, federal agents halted their search for Bitcoin and destroyed seized devices, including the hard drive central to Prime’s case.

After his release, Prime filed a motion under Rule 41(g), which permits defendants to request the return of seized property after a case concludes. However, his motion was denied by a district court in 2024, which ruled that the devices were "properly destroyed" and that Prime’s years of denial invalidated his claim. The Eleventh Circuit concurred, stating that Prime’s "inexcusable delay" had prejudiced the government and upheld the rejection of his claim, noting that compensation would be inequitable "even if the Bitcoin existed."

Bitcoin isn’t stored on a hard drive but exists on a decentralized blockchain, a public ledger distributed across thousands of computers. Hard drives can store private keys or wallet files, which are necessary to access and spend Bitcoin. Without these keys, the Bitcoin remains on the blockchain but becomes effectively unreachable since ownership and control cannot be established.

The phenomenon of "lost coins" has long been acknowledged in the Bitcoin community. As Satoshi Nakamoto, Bitcoin’s pseudonymous creator, famously wrote in 2010: "Lost coins only make everyone else's coins worth slightly more. Think of it as a donation to everyone." According to a 2025 report by River Financial, between 2.3 million and 4 million BTC—or 11% to 18% of the total supply—are permanently lost. This includes approximately 3.8 million Bitcoin in wallets inactive for over a decade, reducing the effective circulating supply to an estimated 15.8 to 17.5 million BTC, out of the hard cap of 21 million.