$345 Million In Bitcoin Gone — But FBI Isn’t At Fault, Judges Say
The US Court of Appeals for the Eleventh Circuit has affirmed a district court docket’s refusal to award a Florida defendant the worth of roughly 3,443 bitcoin—now “value over $345 million”—after the federal government destroyed an exterior exhausting drive he belatedly claimed held the keys, holding that the equitable doctrine of laches bars reduction as a result of he spent years denying he owned significant cryptocurrency. The printed opinion, authored by Judge Elizabeth “Lisa” Branch Grant and joined by Judges Jill Pryor and Marcus, leaves intact the decrease court docket’s ruling that the United States can’t be compelled to switch the bitcoin, even assuming the drive ever contained it.
FBI Not To Blame For 3,443 Bitcoin Hard Drive Wipe
The case, United States v. Prime, No. 23-13776, arose from a 2019 arrest that uncovered intensive counterfeiting and identity-theft paraphernalia. Michael Prime finally pleaded responsible to access-device fraud, aggravated id theft, and unlawful firearm possession. In the investigation’s early days, brokers tried and failed 3 times to find cryptocurrency tied to his actions underneath federal warrants; by sentencing in June 2020, Prime and his counsel had walked again earlier references to 1000’s of bitcoin, representing as an alternative that his remaining crypto was trivial. The authorities proceeded accordingly.
As Judge Grant summarized, Prime “at the very least 3 times” represented he owned “little or no bitcoin,” and after launch he nonetheless didn’t establish any system as holding invaluable keys when he sought the return of property. The authorities adopted its “odd practices,” wiping gadgets it may after discover; the remaining—together with the orange exterior drive at difficulty—have been destroyed. “Only later did Prime declare to be a bitcoin tycoon,” the court docket wrote. “By then it was too late.”
Although headlines have centered the FBI, the file reveals it was the US Secret Service that contacted Prime in mid-2022 providing to wipe and return sure gadgets if he offered passwords. He requested for a pickup time, then filed professional se motions as an alternative; none of these filings talked about bitcoin or a tough drive. The drive was later destroyed with different electronics as a result of Prime refused to cooperate in eradicating contraband knowledge.
The Eleventh Circuit underscored causation and prejudice: “We have little issue concluding that the federal government wouldn’t have destroyed the hard drive if it had thought that it contained thousands and thousands of {dollars} in bitcoin.” With the drive gone, “the federal government can’t return it,” and to the extent the bitcoin ever existed—“and we’ve our doubts”—ordering the United States to “discover and hand over virtually 3,443 substitute bitcoin” could be prejudicial “now to the tune of over $345 million.”
The panel was brazenly skeptical of Prime’s makes an attempt to reframe his disclosures. He argued, for instance, that when he reported “$200 to $1,500 in bitcoin” in February 2020, he meant the then-market worth of a single bitcoin, not his holdings. “We don’t purchase it,” the court docket wrote, noting that in February 2020 BTC traded between “about $8,500 and $10,500” and that Prime had promised “full, correct and truthful” asset disclosures encompassing any asset wherein he had “any curiosity” or management. The opinion quotes protection counsel’s personal admission at sentencing that the unique declare to “some large amount of bitcoin” was “not supported by the proof.”
Having affirmed on laches, the Eleventh Circuit didn’t attain broader questions, equivalent to whether or not any BTC—if it existed—would have been forfeitable. The court docket additionally famous Prime forfeited any problem to the factual discovering that the drive was destroyed by failing to boost it beneath.
The slim holding is that equitable reduction is unavailable the place a claimant’s multi-year denials induced the federal government to cease trying to find property and to course of seized electronics within the odd course—conduct the panel repeatedly tied to his non-cooperation and delay quite than to any governmental dangerous religion. As Judge Grant summarized the district court docket’s backside line, “laches barred his bitcoin request. We agree and affirm.”
At press time, BTC traded at $102,825.
