Prosecutors Respond to Motion to Suppress Evidence in $35M Crypto Embezzlement Case

News | May 20, 2024 By:

On Friday, May 10, 2024, the United States government filed a response opposing a motion to suppress evidence in an embezzlement case involving the use of cryptocurrency.

Nevin Shetty, the former CFO of Commerce Fabric Inc., is accused of wiring over $35 million of his employer’s funds to financial accounts under his personal control. Court documents allege that Shetty then secretly invested almost all of the money in cryptocurrency investments without his employer’s knowledge or consent. The company’s board of directors had adopted an investment policy that prohibited the use of funds for cryptocurrency speculations.

Shetty established a company called HighTower Treasury, which was described as offering cryptocurrency-related financial services like decentralized finance or “DeFi” savings. However, HighTower apparently only had two clients – Shetty and a business partner. Prosecutors claim Shetty fraudulently presented HighTower as an outside investment firm capable of managing Commerce Fabric Inc.’s funds when in reality Shetty owned and controlled HighTower himself.

Shetty is said to have ordered four wire transfers from Commerce Fabric Inc.’s bank account to a cryptocurrency trading platform. The money was invested in Terra Coin, a type of cryptocurrency, without proper authorization from Commerce Fabric Inc. The investments immediately started losing value and became nearly worthless when Terra Coin plummeted in value in mid-May 2022. Shetty disclosed what he had done only after the losses were realized.

As part of an ongoing federal investigation into potential wire fraud, government agents applied for and received a search warrant for Shetty’s home and electronic devices based on the details of the alleged scheme. Shetty has filed a motion seeking to suppress any evidence collected during the execution of that search warrant. He claims the agent who drafted the affidavit in support of the search warrant application misrepresented key facts about Commerce Fabric Inc.’s investment policies and Shetty’s authority.

In its response, the U.S. Attorney’s Office vigorously defends the search warrant as supported by probable cause. Prosecutors maintain the agent accurately described Commerce Fabric Inc.’s conservative investment guidelines and Shetty’s non-compliance.

The response also argues Shetty’s interpretation of aspects of the policy that he claims gave him authority to make any investment are factually unfounded and contradict the written terms. Dismissing Shetty’s other criticisms as meritless, prosecutors assert no evidence obtained during the warranted search should be suppressed.

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