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Court Orders Prison for CFO After High-Stakes Crypto Fraud

Nevin Shetty, a former CFO of the Seattle-based startup Fabric, has been sentenced to two years in prison for orchestrating a $35 million wire fraud scheme linked to unauthorized cryptocurrency investments.

Shetty, 42, diverted company funds into a risky decentralized finance (DeFi) project, operating a secret side business called HighTower Treasury.

His plan involved funneling $35 million from Fabric into high-yield DeFi lending protocols, initially generating a profit of approximately $133,000.

However, the situation deteriorated rapidly when the TerraUSD stablecoin de-pegged in May 2022, leading to significant financial losses.

Judge Tana Lin pointed out the devastating impact of Shetty's actions, noting that his gamble led to the layoffs of 60 employees and nearly drove the company out of business.

Despite claims from his defense that his actions were simply unauthorized investments, prosecutors emphasized that Shetty's deceitful behavior amounted to fraud.

The jury unanimously agreed, rejecting Shetty’s argument and labeling his actions as a web of lies.

First Assistant U.S. Attorney Charles Neil Floyd highlighted that Shetty's choice of high-risk DeFi protocols showed the reckless nature of his decisions.

This case stands out as one of the first significant criminal sentencing related to the intersection of corporate finance and the volatile DeFi landscape.

As the crypto industry continues to grow, regulatory bodies are likely to scrutinize similar cases to prevent mismanagement and protect investors.