Court Denies Nevin Shetty’s Motion to Dismiss Wire Fraud Charges
On Wednesday, December 4, 2024, the United States District Court for the Western District of Washington denied Nevin Shetty’s motion to dismiss an indictment that charged him with wire fraud. The ruling came as part of case number 2:23-cr-00084-TL, where Shetty, the former Chief Financial Officer (CFO) of Commerce Fabric Inc. (Fabric), is accused of illicitly transferring $35 million of the company’s funds to HighTower Treasury, a cryptocurrency company he owned.
The indictment alleges that Shetty executed the unauthorized transfer of funds in violation of Fabric’s established investment policy, which limited investments to conservative and liquid options. According to court documents, Shetty’s actions were characterized as a scheme to defraud Fabric by enriching himself through investments in HighTower, with the funds ultimately lost in a failed cryptocurrency venture.
The case centers on several key facts. Shetty joined Fabric in 2021 and was entrusted with significant financial responsibilities, including signatory authority for the company’s bank accounts. Concerns regarding his competency arose by early 2022, leading to an agreement for his departure later that year. Despite these concerns, Shetty allegedly executed a “Treasury Account Agreement” with HighTower on March 31, 2022, without informing Fabric’s board of directors.
Between April 1 and April 12, 2022, Shetty transferred $35 million from Fabric to HighTower’s account using interstate wire transmissions. The indictment claims that these actions were hidden from other executives at Fabric, and the subsequent investments in cryptocurrency resulted in substantial losses, nearly depleting the company’s funds.
The court’s decision emphasized that the allegations in the indictment sufficiently indicate Shetty’s intent to defraud Fabric, asserting that he knowingly violated the company’s investment policy. The ruling noted that the indictment adequately alleges the elements of wire fraud, particularly that Shetty’s actions constituted an actual deprivation of funds, not merely a loss of information.
During the proceedings, Shetty’s defense argued that his actions were not criminal under the wire fraud statute, citing the lack of bribery or kickbacks in his dealings. They contended that the case fell under the “self-dealing” category, which they claimed had been deemed non-criminal in previous rulings. However, the court rejected this interpretation, affirming that the indictment presented a scenario of traditional fraud where Fabric suffered a financial loss as a direct result of Shetty’s unauthorized actions.
The court’s rationale highlighted the distinction between self-dealing and actions that violate explicit company policies. The judge noted that while Shetty may have been tasked with finding investment opportunities for Fabric, his decision to use HighTower without disclosure removed Fabric’s control over its funds, thereby constituting a fraudulent act.
In addition to denying the motion to dismiss, the court also referenced relevant Supreme Court precedents on wire fraud, clarifying that the indictment sufficiently alleged a scheme to defraud a traditional property interest. The ruling stated that the indictment met the requirements for sufficiency, as it informed Shetty of the charges against him and allowed for a defense against double jeopardy.
As a result of this decision, Shetty faces ongoing prosecution on four counts of wire fraud under 18 U.S.C. § 1343. Following the court’s ruling, the case will proceed to trial, where the government will present its evidence against Shetty.
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