The FBI raided the home of cryptocurrency executive Jesse Powell in March as part of a hacking and cyberstalking campaign against a nonprofit he founded, three people familiar with the matter said. part of the criminal investigation.
The investigation is focused on an allegation by the nonprofit that Powell, the founder of cryptocurrency exchange Kraken, tampered with his computer account, blocking access to emails and other messages, the people said. Special agents from the FBI and the U.S. Attorney’s Office for the Northern District of California have been investigating Powell since at least last fall, according to three people familiar with the matter.
Agents searched Mr Powell’s home Home Electronic devices were seized in the Brentwood neighborhood of Los Angeles, according to a person familiar with the search and documents reviewed by The New York Times. Prosecutors have not charged Powell with any crimes.
Powell’s attorney, Brandon Fox, confirmed that he is being investigated by federal prosecutors in Northern California. Fox said the investigation, which focuses on allegations by art group Fringe Center for the Arts, “has nothing to do with Mr. Powell’s employment or his conduct in the cryptocurrency space.” He also said Powell “did nothing wrong.”
A Kraken spokesperson said the Verge investigation had nothing to do with the company, and that Kraken had no reason to believe prosecutors were looking into other potential issues.
A representative for the FBI declined to comment. A spokesman for the U.S. Attorney’s Office for the Northern District of California declined to confirm whether an investigation was ongoing.
Federal investigators have cracked down on several of Kraken’s competitors in recent months. FTX cryptocurrency exchange founder Sam Bankman-Fried was accused of fraud last year, while the two largest exchanges, Coinbase and Binance, face government lawsuits.
Mr. Powell, 42, was a key figure in the early history of cryptocurrencies, building Kraken into the second-largest U.S. cryptocurrency exchange behind Coinbase.
His company has faced legal scrutiny for years. In recent months, prosecutors have reviewed allegations against Kraken and Powell that were brought in a wrongful termination lawsuit filed against the company in 2019, two people familiar with the matter said. In that lawsuit, a former Kraken employee accused the company of earning income from accounts in countries subject to U.S. sanctions and claimed that Kraken lost millions of dollars in customer deposits from its bank accounts.
The suit was settled in 2021, and a judge rejected the employee’s contention that his firing was related to the sanctions issue.
Last year, Kraken paid a $360,000 fine to settle Treasury Department charges that it violated sanctions by allowing Iranian users to trade digital currencies.In February, Kraken paid $30 million fine Reported to the SEC that it offered investment products that violated securities laws.
Mr. Powell founded the Sacramento arts collective Verge in 2007. Last year, the group removed him from the board for failing to attend board meetings and violating the group’s “guiding principles,” court records show. After The Times published an article detailing Powell instigating debates about race and gender, some Kraken employees found the debates offensive and deleted them.
After Powell was fired, he blocked Verge from using its website, email and internal messaging systems and improperly accessed confidential information stored in those accounts, according to a November letter sent to Kraken by Verge’s attorney, Phillip Cunningham. The Times reviewed the letter.
Last month, Powell sued Verge in Sacramento state court, claiming his removal was improper and that he owned Verge’s digital account. Wedge’s lawyer, Cunningham, said there was no basis for Powell’s claims.
In September, Powell announced his resignation as CEO of Kraken, while retaining his chairmanship. He is succeeded by Kraken chief operating officer Dave Ripley, who took over the company in March.
Kirsten Noyce Kitty Bennett also contributed research.