Nevin Shetty, the 39-year-old former chief financial officer of Seattle-based Fabric, was indicted on Wednesday for four counts of wire fraud.
The U.S. District Court for the Western District of Washington indicted Shetty after he allegedly diverted $35 million of Fabric's money to his personal cryptocurrency company, HighTower Treasury. Shetty planned to pay Fabric 6% interest on the investment and have HighTower keep anything beyond that, but the value of the investment plummeted to nearly nothing by May of 2022.
According to the indictment, Fabric hired Shetty in March 2021, but concerns over his job performance led to Fabric telling him in March 2022 that he was being let go. The plan was for him to leave the company around June 2022. Right before being informed his termination, however, Shetty and an associate had founded HighTower.
Despite helping to draft and disseminate an investment policy for Fabric that only approved certain conservative investments, according to the indictment, Shetty in April 2022 funneled the $35 million to HighTower after learning he was being let go. He informed CEO Faisal Masud of his actions on May 13, 2022, after losing nearly all of the money.
Shetty's arraignment is scheduled for May 25. His attorney, Cooper Offenbecher, said in an emailed statement to the Business Journal he and Shetty have been in regular communication with prosecutors.
"As the CFO of his former employer, tasked with making investment decisions for its benefit, Mr. Shetty was personally devastated by these losses, which occurred as a result of a catastrophic crash in the cryptocurrency market in May 2022," Offenbecher said in the statement. "We look forward to responding to these allegations in court."
Fabric helps clients make changes to their digital storefronts without needing to make complicated back-end changes. Its clients include GNC and Chico's.
The company raised a $140 million Series C round in February 2022 and hit a value of about $1.5 billion. Fabric raised over $140 million across two rounds in 2021.
"We are thankful for and appreciate the hard work that the FBI and U.S. Attorney’s Office have done in helping resolve this matter," Fabric said in a statement to the Business Journal. "While the amount taken is substantial, Fabric remains very well-funded with years of runway.”
According to a Business Insider report, Fabric announced an employee stock-buyback program, a way for employees to sell some of their vested equity, on May 15, 2022, just days after Shetty had told company leadership he lost the $35 million. On May 25, however, Fabric has rescinded the program, blaming "unpredictable market conditions."
Fabric told the Business Journal its decision to pull the program was not related to Shetty's alleged wire fraud.
