The U.S. Federal Bureau of Investigations (FBI) has searched the Los Angeles home of Kraken co-founder Jesse Powell in March, as part of a non-digital asset related criminal investigation into claims that he hacked and cyber-stalked a nonprofit art group that he founded, reported the New York Times on Thursday.
According to the report, which cites three unnamed sources “with knowledge of the case,” federal agents seized electronic devices during the search earlier this spring.
The FBI and U.S. attorney’s office for the Northern District of California have been investigating since 2022 whether Powell interfered with computer accounts and blocked access to emails and other messages for a nonprofit he founded in 2007.
The group, called Verge Center for the Arts, removed Powell from its board of directors in 2022 over his alleged failure to attend meetings as well as breaching the organization’s principles, the report claims.
After Powell’s dismissal, he blocked Verge from using its website, emails and internal messaging system, and improperly accessed confidential information stored in those accounts, according to a letter, viewed by The New York Times, that Verge’s lawyer sent to Kraken in November.
Powell and Kraken controversies
Powell launched Kraken with Thanh Luu and Michael Gronager in 2011; he become its CEO and spearheaded the company until 2022.
In September it was announced that Powell would be stepping down as Kraken CEO, to be replaced by the company’s chief operating officer (COO) Dave Ripley. Powell stated at the time that he had come to find the role “draining” and “less fun” as the company grew. Despite taking a step back, he remains to this day Kraken’s largest shareholder and chairman of its board of directors.
Kraken is the third largest digital asset exchange as of 2023, although Powell’s tenure was not without controversy—individually and for Kraken.
In July 2021 Powell came under fire when an earlier 2019 Twitter conversation resurfaced, in which he seemingly admitted using money laundering tactics to circumvent regulatory obligations. In the offending post he described some of his business activities as “a compliance person’s worst nightmare but I basically had to employ the arts of a money launderer to survive.”
During Powell’s time as CEO, Kraken also became embroiled in a lengthy battle with the U.S. Internal Revenue Service (IRS). The U.S. tax agency requested user information from Kraken in May 2021 to identify accounts that conducted at least $20,000 in digital asset trading in any year between 2016 and 2020.
The exchange refused to comply, describing the IRS’s demands as “too broad” and imposing an “enormous burden.”
This dispute went to the courts and, after some back and forth, earlier this month the U.S. District Court for the Northern District of California ruled that Kraken must provide the IRS with the requested account and transaction information.
Kraken has made sure to distance itself from its former CEO’s latest controversy, which appears to be unrelated to the digital asset space, but it remains to be seen whether it will get dragged into the conflict as more information emerges about the investigation.
The FBI and District Attorney’s office have yet to comment on the report, but the New York Times stated that it had received confirmation of the investigation from one of Powell’s lawyers, who also confirmed that it had no connection the Kraken co-founder’s digital asset activities.
Powell has yet to be officially accused of any crimes in relation to the investigation.
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