Seattle CFO Jailed Over Crypto Scheme

The former CFO was Nevin Shetty of the Seattle-based e-commerce startup Fabric. Shetty established a side business named HighTower Treasury, which had no other clients, to handle the illicit crypto investments. He acted after being informed that he would be removed from his CFO role due to performance issues. Despite helping to draft Fabric's conservative investment policy, which limited holdings to low-risk accounts, Shetty secretly transferred $35 million of company funds. The transfers were made between April 1 and April 12, 2022, to his HighTower Treasury entity without the knowledge of other executives or the board. Shetty invested the stolen funds into high-yield decentralized finance (DeFi) lending protocols, some connected to the Terra ecosystem, which promised returns of 20% or more. His plan was to pay Fabric 6% interest while he would keep the remainder of the profits generated through HighTower. The investment initially generated a profit of about $133,000 in its first month. However, the investment was nearly wiped out by the collapse of the Terra ecosystem in May 2022. After losing the money, Shetty confessed to his colleagues and was immediately fired. The financial loss had severe consequences for Fabric, which was forced to lay off 60 employees and was nearly driven out of business. Judge Tana Lin highlighted these significant and severe effects on the company during sentencing. Shetty was found guilty of four counts of wire fraud after a nine-day jury trial. While prosecutors sought a nine-year sentence, he was ultimately sentenced to two years in prison and ordered to pay $35,000,100 in restitution. He will also have three years of supervised release after his prison term.