FBI drops probe into Kraken founder Jesse Powell, returns seized devices

Powell's attorney requested a DOJ letter to counter the alleged reputational damage caused by the raid.

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The US Justice Department has closed its investigation into Kraken’s founder Jesse Powell, and returned dozens of laptops and mobile phones agents seized during an FBI raid two years ago, Fortune reported on July 22.

The federal case did not revolve around Kraken’s operations, but rather a bitter governance fight at the Verge Center for the Arts, a Sacramento nonprofit Powell founded in 2008.

News of the raid first surfaced in The New York Times, which reported that agents were probing allegations Powell had “hacked and cyber-stalked” the nonprofit.

Court filings since then depict something far less cinematic: a dispute over who controlled Slack and Google Workspace accounts after Powell was pushed off Verge’s board. 

Powell insisted he never cut off anyone’s access and argues instead that Verge insiders quietly created a new domain and parallel work accounts before moving to oust him. 

He is pursuing a civil lawsuit in state court, accusing former colleagues of defamation and wrongful removal.

Justice Department drops the case

Documents Powell filed this week include a so-called declination letter from prosecutors, confirming the Justice Department has walked away from the case.

His attorney said he requested the letter to counter the reputational damage caused by the raid and to reassure banks and regulators that Kraken’s leadership is not under federal scrutiny. 

Powell called the search “devastating” personally and professionally, maintaining that discovery in his lawsuit has already shown the accusations to be baseless.

The government’s exit does not resolve lingering questions. Neither the Justice Department nor the FBI would comment on how the Times obtained details of the investigation.

Powell’s latest filings also accuse two Verge board members, one of them attorney Phil Cunningham, of withholding key documents during discovery. 

Verge, meanwhile, continues to operate as a fixture of Sacramento’s arts scene, supported over the years by more than $1 million in donations and extensive tech assistance from Powell. 

Notably, Powell declined to say whether the returned devices held Bitcoin or other digital assets. When agents seized the hardware, Bitcoin (BTC) traded near $23,000. As of press time, BTC trades near $119,000.

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