Bitcoin: U.S. Court of Appeals Rules FBI Not Liable for Erasing Hard Drive Containing Over 3,400 BTC

In a recent appellate ruling, the Court of Appeals held the FBI is not liable for erasing a hard drive believed to contain approximately 3,400 BTC, since the owner failed to disclose holdings to authorities prior to seizure.

The defendant, Prelim, previously served time for identity theft and sought return of the drive after release in July 2022. The court deemed the appeal untimely and cited inconsistent testimony, undermining the assertion that the asset holder possessed the cryptocurrency.

Before a November 2019 plea, Prelim claimed ownership of about 3,500 Bitcoin; after incarceration, a February 2020 financial disclosure to the government suggested the stake was only a few thousand dollars.

Context from on-chain analytics shows the scale of permanent losses: Glassnode reports about 1.46 million BTC may be permanently lost, roughly 7% of supply, while Chainalysis estimated up to 3.7 million BTC could be unrecoverable, about 17.5% of total supply.