Key Takeaways:

  • The U.S. Attorney's Office for the Western District of Washington said in a press release Thursday that Nevin Shetty, former CFO of Fabric, was convicted of misappropriating $35 million from his former employer, involving a failed cryptocurrency investment scheme, and wasfound guilty of four counts of wire fraud。
  • Between April 1 and April 12, 2022, the 41-year-old former CFO secretly transferred company funds from Fabric, a retail software company, to accounts of HighTower Treasury, a cryptocurrency platform he owned, without informing other executives. He then invested these funds in cryptocurrency positions, intending to provide interest to Fabric, but the value of cryptocurrencies fell at the time, nearly wiping out the investment.
  • "This defendant abused his power and position of trust to try to profit from his crime, and then lied to cover it up," U.S. Attorney Charles Neil Floyd said in a statement attached to the press release. "I am proud of the work of our lawyers and support staff, who calmly and meticulously helped the jury see through the lies woven by the defense to rationalize what was essentially theft."

Deep Dive:

According to the press release, after a nine-day jury trial that concluded on November 7, Shetty was found guilty of misappropriating and abusing company funds. Judge Tana Lin scheduled his sentencing for February 11, 2026.

"We are disappointed with this outcome but will vigorously pursue an appeal," J. Alex Little, managing member of Litson PLLC and Shetty's attorney, said in an email statement to CFO Dive. "Corporate executives should not be criminally prosecuted for making an investment that the board later disagreed with."

Fabric, a retail software provider, first hired Shetty as its finance chief in March 2021, after itcompleted a $43 million Series A funding round, according to a press release at the time.

Shetty served in that role for about a year, helping formulate the company's investment policy for its funds while it continued to raise capital, before the board "became concerned about his capabilities" and was told by Fabric's chief operating officer in March 2022 that he could no longer serve in that role, as previously reported by CFO Dive.

According to a 2023 federal indictment, Shetty incorporated HighTower Treasury in February 2022 and, on March 31 of that year, signed a "fund account agreement" between HighTower and Fabric on behalf of Fabric, without the knowledge of other executives. The agreement referred to funds from Fabric as a fund account and stipulated terms for interest payments.

Starting April 1, 2022—the day after the agreement was signed—Shetty transferred approximately $35 million of Fabric's funds into the account and invested them in cryptocurrency positions that could yield up to 20% annual interest, according to Thursday's press release.

"Shetty's idea was that HighTower would pay Shetty's company 6% of that interest and retain any remaining interest earned on the cryptocurrency investments for HighTower, which could be substantial. As the owner of HighTower, Shetty stood to keep those profits," the press release said. "In the first month, Shetty's scheme earned him and his HighTower business partner approximately $133,000 in profits."

However, shortly after the initial wire transfers, TerraUSD, then the third-largest cryptocurrency ecosystem, and its sister token Luna collapsed during the so-called "crypto winter" that began in May 2022, according to a working paper by the National Bureau of Economic Research in April 2023,which erased $50 billion in valuation. This collapse reduced the value of Shetty's investments to nearly zero.

"After the funds had largely disappeared, Shetty told two of his executive colleagues what he had done. He was immediately fired," Thursday's press release said, and the company subsequently reported the matter to the FBI.

The U.S. Attorney's Office declined to comment beyond its press release. Fabric did not immediately respond to a request for comment.