Powell Calls Investigation “Unprecedented”

In a video statement released on January 11, Jerome Powell confirmed that the US Department of Justice had issued a subpoena to the Federal Reserve. He stated that prosecutors are considering criminal charges related to his testimony before a Senate committee about the scope and cost of the Fed’s building renovations.

Powell described the situation as “unprecedented,” arguing that the investigation is not merely a legal matter but a direct consequence of his refusal to lower interest rates under political pressure. According to Powell, the case raises a fundamental question about whether US monetary policy will continue to be guided by economic data and evidence, or instead shaped by political coercion and intimidation.

While emphasizing his respect for the rule of law and accountability, Powell warned that the investigation must be viewed within the wider context of sustained pressure on the central bank from the executive branch.

Renewed Tensions Between Trump and the Fed

Former President Donald Trump has repeatedly criticized Powell for not cutting interest rates aggressively enough, frequently blaming the Federal Reserve for economic challenges in the US. Over the years, Trump publicly threatened to remove Powell from his position and pursued similar actions against other Fed officials, including board member Lisa Cook. Those efforts were ultimately blocked by federal courts.

Although the Fed implemented three interest rate cuts in the second half of 2025, Trump and his allies continued to argue that monetary policy remained overly restrictive. Trump has also consistently directed blame toward both the Fed and former President Joe Biden for economic difficulties.

Political Backlash and Institutional Risks

The investigation has triggered strong reactions in Congress. Republican Senator Thom Tillis stated that he would oppose any attempts to replace Powell or other Fed officials until the legal process is fully resolved. On the Democratic side, Senator Elizabeth Warren warned that the investigation represents an effort to undermine the Federal Reserve’s independence and place the institution under political control.

With Powell’s term as Fed chair set to expire in May, speculation about potential successors aligned with Trump has intensified. As a result, the controversy is increasingly seen not only as a legal dispute, but as a pivotal moment for the future independence and credibility of the US central bank.

Overall, the case underscores how legal, political, and economic pressures are converging around the Federal Reserve at a critical juncture for US monetary policy.

Gold Hits New All-Time High Amid Powell–Trump Tensions

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Why Was the Tornado Cash Case Filed?

The Tornado Cash case has emerged due to allegations that the decentralized crypto mixer platform, it, was involved in illegal activities such as money laundering and illicit fund transfers. It is a platform that anonymizes transactions on Ethereum and other blockchain networks, allowing users to hide their transactions. However, this anonymization feature has also been exploited by criminals for illicit purposes.

In 2022, the U.S. Department of the Treasury added Tornado Cash to its sanctions list, accusing it of violating anti-money laundering and terrorism financing laws after being used by criminals to launder illegal funds. Following this, Roman Storm, one of the founders of Tornado Cash, and other developers were sued for allegedly being involved in the platform’s management and potentially facilitating criminal activities.

This case has raised important questions about the legal responsibilities of software developers and platforms in the decentralized finance (DeFi) world. The case addresses key issues related to whether the development of the platform constitutes a crime and how the legal framework for software and decentralized systems will be shaped.

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Role of Dragonfly

Prosecutors claim that Dragonfly’s Telegram messages regarding it suggest the company had knowledge of the platform’s operations and potentially overlooked activities that could be considered criminal. However, Dragonfly argues that these communications were solely within the context of investor relations and did not constitute any criminal activity.

Legal Process

The case represents a critical turning point in terms of the responsibility of software developers and the legal framework of decentralized finance systems. The court’s decision could not only shape the future of Tornado Cash but also influence the legal status of the decentralized finance ecosystem.The Tornado Cash case has drawn attention as a case that challenges the legal boundaries of decentralized finance and the responsibilities of software developers. Dragonfly’s role in this process carries significance beyond investor relations and is of crucial importance for the future of decentralized finance.

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A Legal Battle Unrelated to Crypto Operations

The 2022 FBI raid initially caused a stir, especially after media outlets reported allegations of hacking and cyberstalking. However, as more details came to light, it became clear that the matter was not related to Kraken or any misconduct within the crypto market, but instead involved internal conflicts within a non-profit organization called Verge Center for the Arts.

Powell, who founded Verge in 2008 to support the Sacramento arts scene, became entangled in a management dispute with board members. The conflict centered around access to communication tools like Google Workspace and Slack, not malicious cyber activity. Powell has consistently denied any wrongdoing.

Devices Returned, Evidence Supports Powell’s Claims

In recent court filings, Powell revealed that the Justice Department has closed the investigation and returned dozens of devices, including laptops and smartphones. According to Powell, the data on these devices backs his version of the story and further discredits the accusations made against him.

Describing the ordeal as “personally and professionally devastating,” Powell expressed relief that the case had come to an end. “It’s still shocking that the raid was based on unfounded claims from Verge. I knew I had done nothing wrong, and the evidence proves it,” he stated.

Civil Lawsuit Against Non-Profit Board Continues

Despite the closure of the criminal investigation, Powell is moving forward with a civil defamation lawsuit against members of the Verge board. He claims that two individuals failed to hand over crucial documents during the legal discovery phase. One of them, Phil Cunningham, also serves as legal counsel for Verge but has declined to comment on the matter.

Reputational Impact on Kraken and the Crypto Sector

Brandon Fox, Powell’s attorney, confirmed receipt of an official “declination letter” from the Department of Justice, formally stating that the case is closed. This document plays a vital role in protecting Powell’s reputation and ensuring that Kraken, a platform aiming to go public, remains compliant with financial regulations.

However, lingering concerns remain about how details of the federal investigation were leaked to journalists. The Justice Department has not provided clarity on how this information reached the press.

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In a letter sent to a Manhattan federal court on May 9, the prosecution stated that there was no need for the hearing requested by the defendants, adding that all significant communications with FinCEN (Financial Crimes Enforcement Network) were delivered “months in advance of pretrial motions and trial.”

“The defendants will have seven months to evaluate this information before trial. No further action is necessary,” the statement read.

Defendants Claim Critical Information Was Disclosed Late

On May 5, Samourai Wallet co-founders Keonne Rodriguez and William Hill requested a hearing, claiming that FinCEN officials had stated — six months before the charges were filed — that their service was not considered a Money Services Business (MSB) requiring a license. They argued that this information was disclosed too late by the prosecution.

However, in February 2024, prosecutors charged Rodriguez and Hill with operating an unlicensed money transmitting business and conspiracy to launder money, and arrested them in April. Both individuals have pleaded not guilty.

“It Was an Informal Conversation”

The prosecution emphasized that the conversation with Kevin O’Connor, Head of FinCEN’s Virtual Assets and Emerging Technologies Section, and Lorena Valente from the Policy Division, was “informal, individual, and conditional.”

An email sent by a prosecutor following the August 2023 meeting stated that since Samourai does not take custody of crypto assets, “it would strongly suggest that it should not be considered an MSB.” However, it was also noted that FinCEN personnel “did not have a sense of what FinCEN would decide if the matter were brought before the policy committee.”

Samourai’s lawyers argued that this conversation demonstrated that their clients were not considered money transmitters under FinCEN guidance, and therefore could not be prosecuted for operating without a license.

DOJ Memo on Crypto Mixers Also Under Debate

The defendants also referred to an internal Department of Justice memo released in April, as they filed a motion to dismiss the case. The memo stated that crypto mixing services should not be prosecuted for unintentional regulatory violations.

However, the prosecution objected to the relevance of the memo in a letter to the court, arguing that the document explicitly states that it “may not be relied upon to create any right or benefit” against the U.S. government or its departments.

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On March 6, President Donald Trump signed an executive order officially establishing the US Strategic Bitcoin Reserve (SBR). According to this order, any Bitcoin obtained through criminal or civil asset forfeiture proceedings will be added to the reserve.

However, federal agencies must conduct a detailed audit to determine the exact amount of Bitcoin currently held by the US government.

November 2020: Silk Road Seizure (69,370 BTC)

On November 3, 2020, US authorities seized 69,370 BTC, marking the largest crypto seizure at the time, valued at $960 million.

The Bitcoin was confiscated from an unidentified hacker known as “Individual X”, who had stolen funds from the illicit online marketplace Silk Road. US officials traced these stolen Bitcoin through wallet addresses linked to Silk Road founder Ross Ulbricht before the platform was shut down in 2013.

In December 2024, a court rejected a motion to block the forfeiture of these Bitcoin, allowing the US Department of Justice to sell them. By that time, the value of 69,370 BTC had risen to $6.5 billion.

January 2022: Bitfinex Hack (94,636 BTC)

On January 31, 2022, US authorities seized 94,636 BTC from Bitfinex hacker Ilya Lichtenstein, after accessing his cloud storage account, which contained a file with 2,000 crypto wallet addresses and corresponding private keys.

The seized Bitcoin accounted for approximately 80% of the 119,754 BTC that Lichtenstein had stolen from Bitfinex.

Lichtenstein and his wife Heather Morgan managed to launder 25,111 BTC before authorities could intervene.

In late 2024, Lichtenstein was sentenced to five years in prison, while Morgan received an 18-month sentence. However, experts have noted that the stolen Bitfinex funds were only seized, not forfeited. As a result, these funds could potentially be returned to Bitfinex.

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March 2022: Second Silk Road Seizure (51,351 BTC)

In March 2022, US authorities seized 51,351 BTC from James “Jimmy” Zhong, another hacker linked to Silk Road.

Four months later, US officials discovered the Bitcoin hidden in an underground floor safe and a popcorn tin stored in Zhong’s bathroom closet. At the time, the 51,351 BTC was valued at approximately $3.38 billion, making it one of the largest financial asset seizures in US history.

The US Has Started Selling Seized Bitcoin

On March 14, 2023, the US government sold 9,861 BTC for $215.7 million, all of which came from the Zhong forfeiture case.

Although additional sales of seized Bitcoin were expected to take place in four separate batches throughout 2023, these sales never materialized.

In January 2025, the Department of Justice received approval to sell 198,109 BTC seized from Silk Road. However, the Biden administration did not act on this before Trump‘s inauguration on January 20.

The US Plans to Expand Its Bitcoin Reserve

While the Strategic Bitcoin Reserve will initially be funded only with forfeited BTC, the White House announced that the Commerce and Treasury Secretaries will explore ways to acquire more Bitcoin without incurring costs for US taxpayers.

Moving forward, Bitcoin held in the reserve will no longer be sold. White House AI and Crypto Czar David Sacks criticized the previous US administration for liquidating seized Bitcoin, arguing that the new approach signals a long-term commitment to Bitcoin ownership.

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Value of Stolen Bitcoins from Hack Has Multiplied

The approximately 120,000 Bitcoin seized during the hack was worth $71 million at the time. However, when the US Department of Justice seized these assets in 2022, their value had increased to $3.6 billion. Today, the total value of these Bitcoins has reached approximately $12 billion.

Recovery Process and Developments

On July 6, 2023, Bitfinex received $312,219.71 in cash and 6,917 BCH from the US Department of Homeland Security. These funds will be used to repay the “Recovery Right Tokens” offered to investors following the attack.

On October 25, 2020, concerns arose when approximately $20 million worth of crypto was moved from wallets under US government control.

Legal Process and Status of Defendants

Defendants Ilya Lichtenstein and Heather Morgan were sentenced in November 2024 after pleading guilty to money laundering charges. Since their arrest in February 2022, authorities have recovered approximately $10 billion worth of stolen assets. Other seized assets will be subject to separate processes.

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Court Ruling and Legal Process On December 11, the Supreme Court issued a brief order, rejecting Nvidia’s appeal without providing a reason. This decision upheld the Ninth Circuit’s ruling, which reversed a lower court decision from March 2021 that had initially dismissed the case.

Nvidia was aiming to overturn the Ninth Circuit Court of Appeals ruling from August 2023, which revived a lawsuit filed by Nvidia shareholders in 2018. The lawsuit claims that Nvidia hid over $1 billion in GPU sales to crypto miners and that CEO Jensen Huang downplayed the volume of these sales.

A spokesperson for Nvidia told:  “We would have preferred a decision affirming the trial court’s dismissal of the case, but we are fully prepared to continue our defense. Consistent and predictable standards in securities litigation are essential to protecting shareholders and ensuring a strong economy, and we remain committed to supporting them.”

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Shareholder Claims and Evidence The lawsuit argues that a significant portion of Nvidia’s GPU sales was driven by sales to crypto miners. It points to the decline in sales at the end of 2018, when the crypto market collapsed, causing Nvidia’s stock price to drop nearly 30% in just two days.

In October, the Department of Justice and the Securities and Exchange Commission (SEC) supported the case, stating that Nvidia’s argument was based on false information. The agencies highlighted the shareholders’ case, which includes evidence such as statements from former Nvidia executives and a Bank of Canada report alleging that Nvidia understated its cryptocurrency revenue by $1.35 billion.

Nvidia’s Previous SEC Payment In 2022, Nvidia paid $5.5 million to the SEC to settle charges related to its insufficient disclosure of the impact of crypto mining on its gaming business. The company neither admitted nor denied the SEC’s findings, but this payment raised concerns about Nvidia’s past transparency issues.

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DOJ Upholds Charges Against Roman Storm

Roman Semenov and Storm, together, are accused of colluding to launder money, operate an unlicensed money transmitter business, and deal Tornado Cashes that anonymizes transaction trails. Note that samples such as the Lazarus Group of North Korea were allegedly involved in illicit transfers through Tornado Cash.

Defense’s Claims Disputed in Friday Filing

The central issue of Storm’s argument is that, from a legal standpoint, Tornado Cash is neither a custodial mixing service nor a “financial institution,” and that Storm also did not control the platform’s usage by criminal entities. The defendants’ legal defense was that writing the code itself does not constitute running a money laundering organization by default.

Nevertheless, DOJ contended that Tornado Cash, presented in 2019, consists of the code only but also concerns the overall service, which has a website, user interface, smart contracts, and a network of relayers. The prosecution addressed the fact the fact that Storm’s picture of the system’s functionality wasn’t valid and offered evidence related to user control and developers’ supervision.

Also, the filing highlighted the DOJ’s intentions to introduce substantial evidence to explain the architecture of Tornado Cash, usage patterns, and involvement of Storm. In addition, the filing included screenshots to refute assertions about user autonomy and developer power.

The legal showdown develops, and the trial of Storm is scheduled for September while Semenov, the alleged accomplice, is at large. The DOJ looks firm to win the lawsuit, promising to set up a test case in the areas of cryptocurrency, law enforcement, and financial regulations.

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