Nevin Shetty, the 42-year-old former chief financial officer of Seattle-based e-commerce unicorn Fabric, was sentenced to two years in federal prison on March 5 for wire fraud. The conviction stems from a scheme in which he secretly diverted $35 million of the company's cash into a high-risk decentralized finance (DeFi) play that collapsed within weeks.
The Secret Side Business
According to the U.S. Attorney's Office for the Western District of Washington, Shetty helped draft Fabric's conservative investment policy for its hundreds of millions in venture capital. However, in early 2022, he launched a side venture called HighTower Treasury and devised what prosecutors described as a classic crypto arbitrage plan.
Shetty moved $35,000,100 from Fabric's accounts into HighTower, then channeled the funds into DeFi lending protocols—specifically the Terra/Luna ecosystem, which at the time offered annual percentage yields of 20% or more. His scheme was to pay Fabric a modest 6% “safe” return while pocketing the 14% surplus (approximately $4.9 million) for himself and his partner.
For the first 30 days, the plan appeared to generate roughly $133,000 in personal profit. Then in May 2022, the TerraUSD (UST) stablecoin de-pegged, triggering a $40 billion market wipeout. Within days, the $35 million treasury held by Shetty had plummeted to virtually nothing.
The Fallout and Sentence
The financial hole left by the failed crypto bet forced Fabric to lay off 60 employees. U.S. District Judge Tana Lin stated during sentencing: “The loss had significant and severe effects on the company … You almost put the company out of business … You were playing with money that wasn’t yours.”
Defense lawyers argued that Shetty merely made an “unauthorized investment” rather than committing fraud. However, the jury found that his “web of lies,” including hiding the transfers from the board and other executives, constituted criminal wire fraud. First Assistant U.S. Attorney Charles Neil Floyd remarked: “He chose high-yield DeFi lending protocols that promised 20% returns. His lies did not fool the jury.”
Shetty's case marks one of the most significant criminal sentencings involving corporate treasury mismanagement and the volatile DeFi sector. The ruling underscores the legal risks for executives who treat employer funds as personal gambling capital in the crypto markets.
As Shetty begins his prison term, Fabric is still recovering from the damage. The incident serves as a stark reminder that the promise of outsized crypto yields carries grave consequences when entrusted with other people's money.