The FBI searched the home of cryptocurrency executive Jesse Powell in March as part of a criminal investigation into allegations that he hacked into a nonprofit he founded and stalked it online, three people with knowledge of the matter said.
The investigation focused on the nonprofit’s claim that Mr. Powell, who also founded cryptocurrency exchange Kraken, had entered into its computer accounts, blocking access to emails and other messages, the people said. Three people familiar with the case said that agents from the FBI and the US Attorney’s Office for the Northern District of California have been searching for Powell since at least last fall.
Mr. Powell’s agents searched house in the Brentwood neighborhood of Los Angeles and seized electronic devices, according to a person familiar with the searches and documents reviewed by The New York Times. Prosecutors have not charged Mr. Powell with any crimes.
Powell’s attorney, Brandon Fox, confirmed that he is under investigation by federal prosecutors in Northern California. Mr. Fox said the investigation focused on allegations by the arts group, the Verge Center for the Arts, and “in no way related to Mr. Powell’s employment or conduct in the cryptocurrency space.” He also said that Mr. Powell “did nothing wrong”.
A spokeswoman for Kraken said the Verge investigation is unrelated to the company, and that Kraken has no reason to believe that plaintiffs are investigating other possible cases.
An FBI representative declined to comment. A spokesman for the US Attorney’s Office for the Northern District of California declined to confirm whether an investigation was ongoing.
In recent months, federal investigators have cracked down on several of Kraken’s competitors. Sam Bankman-Fred, founder of cryptocurrency exchange FTX, was charged with fraud last year, while two of the largest exchanges Coinbase and Binance are facing government lawsuits.
A key figure in cryptocurrency history, Mr. Powell, 42, has built Kraken into the second largest crypto exchange in the US after Coinbase.
His company has faced years of legal scrutiny. In recent months, prosecutors have examined allegations against Kraken and Mr. Powell that were brought in a wrongful termination case against the company in 2019, two people familiar with the investigation said. In that lawsuit, a former Kraken employee accused the company of reaping revenue from accounts in countries that were under US sanctions, He claimed that Kraken bank accounts lost millions of dollars in customer deposits.
The suit was settled in 2021, after a judge dismissed the employee’s claim that his dismissal was related to a sanctions issue.
Last year, Kraken paid a $360,000 fine to settle Treasury Department accusations that it violated sanctions by allowing users in Iran to trade cryptocurrencies. In February, Kraken paid a $30 million fine to the Securities and Exchange Commission for offering an investment product that the agency said violated securities laws.
Mr. Powell founded Verge, the Sacramento arts group, in 2007. Last year, the group removed him from its board, citing his failure to attend board meetings and violations of the organization’s “guidelines,” according to court records. The removal came after an article in the Times detailed Mr. Powell’s efforts to incite controversy about race and gender that some Kraken employees found offensive.
After Mr. Powell’s firing, he blocked Verge from using its website, emails and its internal messaging system, and improperly accessed confidential information stored in those accounts, according to a letter Verge’s attorney, Philip Cunningham, sent to Kraken in November. The Times reviewed the letter.
Last month, Powell sued the Verge in state court in Sacramento, claiming that his removal was improper and that he owned Verge’s digital accounts. Mr Cunningham, Verge’s solicitor, said Powell’s allegations had no basis.
In September, Powell announced that he was stepping down as CEO of Kraken while remaining chairman of the board. He was replaced by Dave Ripley, Kraken’s chief operating officer, who took over the company in March.
Kirsten Noyes Katie Bennett contributed research.