Former Fabric CFO sentenced to two years in prison for $35 million cryptocurrency scheme

Core Summary

• The U.S. Attorney's Office for the Western District of Washington issued a press release stating that former Fabric Chief Financial Officer Nevin Shetty was sentenced to two years in prison on Thursday. Previously, he was convicted in November on four counts of fraud involving the "misappropriation and misuse" of $35 million from his former employer, related to a failed cryptocurrency investment scheme.
• Although the sentence was shorter than the nine years requested by prosecutors, Shetty was also ordered to repay $35 million. Judge Tana Lin also imposed a special condition: without permission from the probation office, Shetty, now 42, may not serve as an executive or director of any company.
• Lin told Shetty during sentencing: "This loss had a significant and serious impact on the company. Your actions completely disrupted the lives of those 60 (laid-off) employees. You were gambling with money that wasn't yours." This statement was quoted from the press release.

In-Depth Analysis

Retail software provider Fabric hired Shetty as its finance chief in March 2021, shortly after the company completed a $43 million Series A funding round. This timing aligns with information from press releases at the time.

The following year, between April 1 and April 12, 2022, the former CFO, without the knowledge of other executives, secretly transferred company funds via wire from a JPMorgan Chase bank account near his residence to a HighTower Treasury account. HighTower Treasury was a cryptocurrency platform side project he controlled.

Shetty then invested the funds in cryptocurrency positions, intending to provide interest to Fabric. However, the continued decline in cryptocurrency values at that time resulted in the funds being "almost entirely lost." Subsequently, he was terminated by the company.

Before executing this scheme, Shetty had participated in drafting a policy aimed at safeguarding the funds raised by this private software company through conservative investments. However, he did not comply with this policy and instead invested the funds in the "decentralized finance" (DeFi) sector of cryptocurrency. He promised to generate returns of 20% or higher from this investment and planned to pay Fabric a "relatively small, fixed amount" while keeping the remaining profits for himself.

Fabric CEO Mike Micucci said in a statement shared with CFO Dive that this verdict has helped the company get through a difficult period.

Micucci said in a statement emailed to CFO Dive: "This verdict brings a final close to a difficult chapter in our company's history. We are grateful to the FBI and the U.S. Attorney's Office for bringing those who defrauded Fabric to justice. Our focus remains firmly on the future—serving our customers, supporting our employees, and advancing our mission to empower retailers and brands with innovative commerce technology to drive growth and create value."

Shetty's defense attorney, J. Alex Little, a managing member of Litson Law Firm, previously told CFO Dive that they would seek an appeal, arguing that corporate executives should not be criminally prosecuted for making an investment that was later opposed by the company's board.

On Monday, a spokesperson for the law firm shared a statement from Little. Little wrote: "At sentencing, the court acknowledged that Mr. Shetty genuinely believed he was making a safe investment. We are confident in our appeal and believe the record shows that this good-faith belief is fundamentally inconsistent with the criminal intent required to sustain a fraud conviction."