A federal court in Seattle has sentenced Nevin Shetty, the former chief financial officer of e-commerce startup Fabric, to two years in prison for wire fraud after he misappropriated $35 million of company funds into a high-risk cryptocurrency “yield farming” scheme that ended in a total loss.
The Secret Side Business
According to the U.S. Attorney’s Office, Shetty, 42, had helped draft a conservative investment policy for the company’s hundreds of millions in venture capital. But in early 2022, he launched a side entity called HighTower Treasury without board approval. Prosecutors described his plan as a classic crypto arbitrage play: shifting $35,000,100 of Fabric’s cash into HighTower and then funneling the money into decentralized finance lending protocols, specifically the Terra/Luna ecosystem, which at the time offered annual yields of 20% or more. Shetty intended to pay Fabric a modest 6% “safe” return while pocketing the 14% surplus for himself and his partner.
From 30-Day Profit to Total Collapse
For the first 30 days, the scheme appeared to work, generating roughly $133,000 in personal profit. However, the gamble turned into a nightmare in May 2022 when the TerraUSD (UST) stablecoin de-pegged, triggering a $40 billion market meltdown. Within days, the $35 million Fabric treasury held by Shetty had plummeted to near zero. “The loss had significant and severe effects on the company,” U.S. District Judge Tana Lin said during sentencing. “Your actions threw into complete turmoil the lives of those 60 people who were laid off. You almost put the company out of business. You were playing with money that wasn’t yours.”
Impact and Legal Precedent
The financial hole forced Fabric to lay off 60 employees, a point prosecutors emphasized as “irrevocable damage” caused by Shetty’s greed. Despite defense arguments that Shetty had only made an “unauthorized investment” rather than committing fraud, the jury found his “web of lies”—including hiding the transfers from the board—constituted criminal activity. “He chose high-yield DeFi lending protocols that promised 20% returns,” said First Assistant U.S. Attorney Charles Neil Floyd. “His lies did not fool the jury.” The case stands as one of the most significant criminal sentencings involving corporate treasury mismanagement and the volatile DeFi sector, sending a clear warning to executives tempted to speculate with shareholder funds through unregulated crypto markets.