Former CFO Indicted for Secretly Diverting $35M in Company Funds to Crypto Venture
On Wednesday, May 17, 2023, Nick Brown, U.S. attorney for the Western District of Washington, announced that a Mercer Island resident who previously served as a startup company Chief Financial Officer (CFO) was indicted in U.S. District Court in Seattle for transferring $35 million in company funds to a crypto business he controlled.
The indictment alleges that Shetty, who was hired as the CFO of a private company in March 2021, was indicted for wire fraud, which is punishable by up to 20 years in prison. According to the indictment, while attempting to expand its business, the company and Shetty were developing policies for how raised funds should be conservatively invested. The company ultimately decided to invest in fixed-income securities denominated in US dollars.
Despite Shetty agreeing to the investment policy, he moved $35 million in company funds to a cryptocurrency platform he established in February 2022, known as HighTower Treasury. The indictment alleges that Shetty secretly transferred the funds out of the company’s account after being notified of his impending departure as CFO due to concerns about his performance.
“Between April 1 and 12, 2022, Shetty transferred $35,000,100 of his employer’s money to an account for HighTower,” the indictment said. “No one else at the company knew of these transfers. The money was supposed to be invested by HighTower in a realm of cryptocurrency sometimes referred to as decentralized finance or “DeFi.” HighTower would pay Shetty’s company 6% interest and keep the remainder of any interest earned, which could have been substantial. As an owner of HighTower, Shetty stood to keep those profits. Shetty kept this investment in cryptocurrency secret from the board and other employees at the company where he worked.”
Attorney Brown stated that by May 13, 2022, the value of the $35 million investment had almost completely vanished due to the rapid decline of the crypto investments. The company immediately reported the incident to the Federal Bureau of Investigation who launched an investigation.
In a statement, Shetty’s attorney Cooper Offenbecher noted that Shetty has been cooperating with prosecutors.
“We have been in regular communication with the U.S. Attorney’s Office regarding the merit of any criminal prosecution stemming from this investigation and we disagree with the government’s decision to indict Mr. Shetty,” said Offenbecher. “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. We look forward to responding to these allegations in Court.”
A copy of the original filing can be found here.
