Dive Brief:

• Ex-Fabric CFO Nevin Shetty was sentenced Thursday to two years in prison after being convicted in November on four counts of fraud for “taking and misusing” $35 million from his former employer related to a failed cryptocurrency investment scheme, according to a press release from the U.S. Attorney’s Office for the Western District of Washington. 
• Although the prison sentence is shorter than the nine years requested by prosecutors, Shetty was also ordered to repay the $35 million and Judge Tana Lin imposed a special condition that prevents Shetty, 42, from serving as an officer or director of a company without the probation office’s permission. 
• “The loss had significant and severe effects on the company. Your actions threw into complete turmoil the lives of those 60 people (who were laid off),” Lin told Shetty at the sentencing, according to the release. “You were playing with money that wasn’t yours.”

Dive Insight:

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

The following year — from April 1 to April 12, 2022 — the former CFO secretly funneled company funds without the knowledge of other executives from Fabric to an account for HighTower Treasury, a cryptocurrency platform side business he controlled. Shetty moved the money via wire transfers he ordered from a JPMorgan Chase bank near his home, according to the release. 

Shetty subsequently invested the funds in cryptocurrency positions with the aim of providing Fabric with interest, before the declining value of cryptocurrencies at the time left the value “essentially gone.” He was subsequently fired. 

Shetty pursued the scheme after helping draft a policy to keep safe the money the private software company raised by putting it into conservative investments. Instead, Shetty put the money in an area of crypto known as “decentralized finance,” or DeFi, from which he promised to generate returns of 20% or more and sought to pay Fabric a “comparatively small, fixed amount and keep the remainder of the returns for himself.” 

In a statement shared with CFO Dive, Fabric CEO Mike Micucci said the sentencing puts a tough period behind the company.

The “sentencing brings final resolution to a difficult chapter in our company’s history,” Micucci said in the statement emailed to CFO Dive. “We want to extend our appreciation to the FBI and the U.S. Attorney’s Office in bringing to justice the person who defrauded Fabric. 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 that drives growth and delivers value.”

J. Alex Little, managing member for Litson law firm and Shetty’s attorney, previously told CFO Dive that they would pursue an appeal, asserting that corporate officers should not be prosecuted for making an investment that is later opposed by the company board.

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