Former Fabric CFO Files Motion to Dismiss Fraud Indictment Over Crypto Investment

News | June 18, 2024 By:

On Friday, June 7, 2024, Nevin Shetty filed a motion to dismiss the wire fraud indictment against him in the United States District Court for the Western District of Washington.

Shetty, the former chief financial officer of the e-commerce company Fabric, is accused of investing $35 million of the company’s funds into a cryptocurrency account at HighTower Treasury, a company he co-owned. The Department of Justice indictment alleges this was part of a scheme to defraud Fabric for Shetty’s own financial gain.

However, in the motion filed by Shetty’s defense attorneys, they argue the indictment should be dismissed because it fails to establish the elements of wire fraud. The motion acknowledges that while the HighTower investment ended up losing money for Fabric, Shetty was acting in his role as CFO to manage company funds and invested them on Fabric’s behalf.

The defense asserts that simple allegations of self-dealing are not sufficient for wire fraud and that the prosecution must show Shetty intended to deprive Fabric of money or property. The motion contends that according to the indictment’s own facts, Shetty’s interests as co-owner of HighTower were aligned with Fabric since HighTower would only profit if returns exceeded the 6% guaranteed to Fabric.

References were made to recent Supreme Court decisions that have narrowed the scope of fraud statutes. The motion cites Ciminelli v. United States, where the high court ruled in 2023 that deprivation of economic information alone does not constitute fraud, and the object must be deprivation of a traditional property right. Similarly, Shetty’s attorneys point to the precedent that self-dealing alone is not enough to prove fraud without bribery or kickbacks also being involved.

By failing to sufficiently claim Shetty intended to deprive Fabric of money or property as required, the defense asserts the wire fraud indictment lacks necessary elements and must be dismissed. The motion argued alternative activities like firing Shetty or suing him for negligence may have been appropriate responses but do not rise to the level of a criminal offense.

The cryptocurrency aspects are also briefly touched upon, noting that HighTower marketed itself for corporate treasury accounts and generated yield through decentralized finance protocols, though the defense claims this fact is largely irrelevant. Shetty has denied any wrongdoing related to the investment outcome.

Please contact BlockTribune for access to a copy of this filing.