US Justice Department has dropped its criminal investigation into Kraken founder Jesse Powell

U.S. federal authorities, the FBI, have dropped an investigation into crypto exchange Kraken founder and former CEO Jesse Powell, over his dispute with art center Verge. The DOJ has reportedly ordered the FBI to return all electronic devices seized from its raid on Powell’s Brentwood Los Angeles residence in 2022.

According to government documents seen by Fortune on Monday, the US Department of Justice concluded its probe on Powell, who was accused of illegally accessing digital accounts belonging to Verge Center for the Arts, a nonprofit he co-founded in Sacramento in 2007.

The FBI searched Powell’s Brentwood residence in March 2022 and took dozens of laptops and devices. It was acting on claims made by Verge that Powell had blocked access to emails and Slack channels used by the organization. 

Powell proves Verge’s accusations were false 

In July 2023, The New York Times published a report that confirmed the FBI was investigating the 45-year-old Kraken founder. At the time, he was accused of interfering with the nonprofit’s communications systems and stalking members of the group through their digital footprint. 

Investigators from the FBI and the US Attorney’s Office for the Northern District of California had been looking into the matter since at least fall 2021. Powell’s lawyer, Brandon Fox, confirmed the allegations were “in no way related to Mr. Powell’s employment or his conduct in the crypto business.”

In response to the government’s dropped investigations this week, Fox said the Department of Justice sent them a “declination letter” stating the case was now closed. 

“We sought the letter to help offset the damage done to Jesse’s reputation and to Kraken’s operations in a highly regulated industry,” Fox told reporters.

Powell has been denying the accusations both in court and in the press, and even filed a civil lawsuit in 2024 at the California state court, in which he propounded that Verge board members were conducting a power grab.

“I did not hack or stalk anyone, or cut off access to the accounts,” Powell wrote in the court filing. “Verge executives conspired to remove me from the board, and quietly put in place a new domain name and created new workplace accounts before doing so.”

According to Powell, the devices seized by the FBI have messages and internal memos from Verge that corroborate his statements.

“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,” he told NYT.

Per court filings, Powell sued two members of Verge’s board for failing to turn over documents during the discovery process. One of them is Phil Cunningham, the nonprofit’s legal counsel, who wrote to Kraken about the former CEO’s “misconduct” in the Verge.

His attorneys argue that Cunningham broke the law by withholding documents in the organization’s case against Powell, which could exonerate the latter.

According to Powell’s attorneys, the public revelation of the case caused reputational harm to the American entrepreneur.

Kraken’s rough relationship with law enforcement

The 45-year-old crypto businessman was cleared of the Verge’s accusations, but Kraken has been fined severally by US financial authorities for breaking regulatory laws.

In 2023, Kraken paid a $360,000 fine in a settlement with the Treasury Department for violating US sanctions and allowing users in Iran to conduct crypto transactions. Then, in February 2024, the Securities and Exchange Commission (SEC) fined the exchange $30 million over an investment product the agency found to be unregistered securities.

Meanwhile, Nasdaq-listed biotech company Windtree Therapeutics has formed a partnership with the exchange to oversee its BNB-based crypto treasury operations, the two firms announced on Tuesday.

Under the agreement, Kraken will provide custody services, facilitate trading, and handle over-the-counter (OTC) execution of Windtree’s BNB holdings.

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