Federal prosecutors on Wednesday indicted the former chief financial officer of a Seattle-based e-commerce startup for wire fraud.
Ex-Fabric CFO Nevin Shetty funneled around $35 million in company funds to a crypto business he controlled, according to the indictment, filed in U.S. District Court in Seattle.
After being told in March 2022 he would be let go due to concerns about his performance, Shetty secretly transferred the money in April last year to an account for HighTower, his crypto side business, the indictment said.
As the crypto market crashed, the value of those funds was nearly zero by May 13 of last year.
Fabric adopted a policy in March 2022 to invest its cash in conservative investment types, according to the indictment.
Shetty’s plan was to pay Fabric a 6% interest on its investment and keep the additional returns for HighTower, the indictment said.
Shetty, 39, is scheduled for arraignment on May 25.
Shetty joined Fabric in March 2021. He was previously CEO of Seattle startup Blueprint Registry, acquired by David’s Bridal in 2018.
In a statement, Shetty’s attorney, Cooper Offenbecher, said he and his client disagreed with the indictment decision.
“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,” he said in a statement. “We look forward to responding to these allegations in Court.”
Fabric was valued at $1.5 billion last year after raising a $140 million Series C round led by SoftBank. Fabric has raised nearly $300 million to date.
The company offers software, APIs, and other behind-the-scenes technology used by retailers and business-to-business brands for many aspects of online commerce, including pricing/promotion, inventory management, digital storefronts, and payments/checkout.
“Since May 2022, fabric has been cooperating with law enforcement in the investigation of the company’s former CFO Nevin Shetty’s conduct in the misuse of $35 million of fabric funds,” the company said in a statement to GeekWire. “We are thankful for and appreciate the hard work that the FBI and US Attorney’s Office have done in helping resolve this matter. While the amount taken is substantial, fabric remains very well-funded with years of runway.”