FBI Searched Crypto Exchange Founder’s Home
The FBI searched the home of cryptocurrency executive Jesse Powell in March as part of a criminal investigation into claims he hacked into and cyberstalked a nonprofit he founded, three people with knowledge of the matter said.
The investigation focused on an allegation by the nonprofit organization that Mr. Powell, who also founded the cryptocurrency exchange Kraken, had been interfering with his computer accounts and blocking access to emails and other messages, the people said. Agents from the FBI and the US Attorney’s Office for the Northern District of California have been investigating Mr. Powell since at least last fall, three people with knowledge of the matter said.
Agents searched Mr. Powell’s At home in the Brentwood neighborhood of Los Angeles and seized electronic devices, according to a person familiar with the search and documents reviewed by The New York Times. Prosecutors have not charged Mr Powell with any crimes.
Brandon Fox, an attorney for Mr. Powell, confirmed that he is under investigation by federal prosecutors in Northern California. Mr Fox said the investigation focused on the allegations made by the art group, Verge Center for the Arts, and was “in no way related to Mr Powell’s employment or conduct in the cryptocurrency arena.” He also said that Mr. Powell “did nothing wrong”.
A spokeswoman for Kraken said the Verge investigation had nothing to do with the company and that Kraken had no reason to believe prosecutors were investigating other potential issues.
An FBI representative declined to comment. A spokesperson for the U.S. Attorney’s Office for the Northern District of California declined to confirm whether an investigation was underway.
In recent months, federal investigators have cracked down on several of Kraken’s competitors. Sam Bankman-Fried, the founder of the crypto exchange FTX, was charged with fraud last year, while Coinbase and Binance, two of the largest exchanges, face lawsuits from the government.
A key figure in the early history of crypto, Mr. Powell, 42, built Kraken into the second largest US crypto exchange after Coinbase.
His company has been subject to legal scrutiny for years. In recent months, prosecutors have filed charges against Kraken and Mr. Powell was investigating filed in a wrongful termination lawsuit filed against the company in 2019, two people familiar with the investigation said. In that lawsuit, a former Kraken employee accused the company of generating revenue from accounts in countries under U.S. sanctions, claiming that Kraken’s bank accounts were missing millions of dollars in customer deposits.
The lawsuit was settled in 2021, after a judge rejected the employee’s claim that his firing was related to the sanctions issue.
Last year, Kraken paid a $360,000 fine to settle allegations from the Treasury Department that it violated sanctions by allowing users in Iran to trade digital currencies. In February, Kraken paid a $30 million fine to the Securities and Exchange Commission for offering an investment product that the agency determined violated securities laws.
Mr. Powell founded Verge, Sacramento’s art group, in 2007. Last year, the group fired him from its board of directors, citing his failure to attend board meetings and violations of the organization’s “guiding principles,” according to court documents. The removal came after an article in The Times highlighting the efforts of Mr. Powell were described as sparking debates about race and gender that some Kraken employees found offensive.
After the dismissal of Mr. Powell, he blocked Verge from using the website, emails and internal messaging system, and illegally accessed confidential information stored on those accounts, according to a letter sent to Kraken by Verge’s attorney, Phillip Cunningham, in November. sent. The letter was reviewed by The Times.
Last month, Mr. Powell Verge in state court in Sacramento, alleging that his impeachment was improper and that he possessed Verge’s digital accounts. Mr. Cunningham, Verge’s attorney, said Mr. Powell’s allegations had no basis.
In September, Mr. Powell announced that he would step down as CEO of Kraken while remaining chairman. He was replaced by Dave Ripley, Kraken’s chief operating officer, who took over the company in March.
Kirsten Noyes and Kitty Bennett contributed research.