When federal agents raided the home of Kraken founder Jesse Powell two years ago, the Justice Department was in the midst of a sweeping legal campaign against the cryptocurrency industry. The raid, however, had nothing to do with how Powell operated his crypto exchange but instead stemmed from a management dispute with an arts non-profit he had founded. The Justice Department has now dropped the investigation and returned dozens of laptops and cellphones it seized from Powell’s home—but questions remain about why the agency pursued him so aggressively, and how news of the raid leaked to reporters at the New York Times.
Powell is a well known figure in the crypto industry. Along with building Kraken, an early cryptocurrency exchange that is on its way to go public, Powell is known for his outspoken political views that he frequently shares on social media. In 2022, the New York Times published an unflattering profile, highlighting Powell’s comments to Kraken staff that challenged progressive orthodoxy on topics like pronouns and gender.
The following year, the Times broke the news of how the FBI had searched Powell’s house as part of an investigation into allegations the Kraken founder had “hacked and cyber-stalked a nonprofit that he founded.”
Despite the dramatic description, the facts turned out to be more banal. Documents in a civil case filed by Powell against the non-profit, known as Verge, indicate the dispute turned on access to Slack and Google accounts.
In the lawsuit, filed last year in state court, Powell says that he did not hack or stalk anyone, or cut off access to the accounts. Instead, he alleges that Verge executives conspired to remove him from the board, and that they quietly put in place a new domain name and created new workplace accounts before doing so. Powell founded Verge in 2008 to support the arts in Sacramento, where he lived for many years.
Now, documents filed by Powell this week reveal that the Justice Department has dropped the investigation entirely, and returned his cell phones and laptops. The filings add that the returned devices contain information related to Verge that prove Powell’s account of events is correct.
In an email statement to Fortune, Powell expressed relief that the probe has ended and said he intends to continue his civil lawsuit against members of Verge’s board.
“The FBI’s raid on my house was devastating both personally and professionally. It is still shocking that the raid was premised on Verge Center for the Arts baseless accusations against me. I knew that I had done nothing wrong, and discovery in my defamation case against Verge has shown this is undeniable,” said Powell.
In the recent court filing, Powell also alleges that the two Verge board members who sought to remove him failed to turn over key documents during the discovery process. This is a serious allegation, especially concerning one of the board members, Phil Cunningham, who also serves as a lawyer for Verge.
In response to an email about Powell’s allegations, Cunningham declined to comment.
Following the conclusion of the Justice Department investigation, Powell’s attorney, Brandon Fox, received a so-called “declination letter” saying the probe had been closed. Fox says he sought the letter as a means to offset the damage caused to Powell, and to Kraken’s ability to operate in the highly regulated financial industry.
The Justice Department declined to comment on the letter, or on whether the agency was aware of how details of its investigation leaked to the New York Times in the first place.
As for Verge, which Powell has backed over the years with tech support and over $1 million in personal donations, it continues to be a fixture of the arts scene in Sacramento, despite the ongoing litigation.
Powell did not comment on whether he recovered Bitcoin or other cryptocurrencies stored on the devices. At the time the Justice Department seized the devices, Bitcoin was worth around $23,000; today, the price is closer to $120,000.
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