How Did the $35 Million Transfer Happen?

A federal judge in Seattle has sentenced former startup chief financial officer Nevin Shetty to two years in prison after he was convicted of wire fraud tied to a cryptocurrency investment scheme involving company funds.

According to the U.S. Department of Justice, Shetty secretly diverted roughly $35 million from the Seattle-based startup where he served as CFO. The funds were transferred in 2022 to a cryptocurrency platform he controlled called HighTower Treasury, which he operated as a side business without the knowledge of company executives or board members.

The DOJ said Shetty was able to move the funds without detection and used them to place investments in decentralized finance lending strategies that advertised unusually high returns.

In a statement describing the case, prosecutors said Shetty “secretly moved approximately $35 million in company funds to a cryptocurrency platform he controlled as a side business.”

Investor Takeaway

The case shows how internal financial controls, rather than blockchain mechanics, often determine whether corporate crypto exposure becomes a fraud risk.

What Happened to the DeFi Investments?

After transferring the funds, Shetty directed the money into decentralized finance lending protocols that advertised returns of 20% or more. For a brief period the strategy appeared profitable. Court filings show the investments generated about $133,000 during the first month.

The gains proved short-lived. The collapse of the Terra ecosystem in 2022 triggered a broader market crash across digital assets and DeFi lending platforms. As prices fell and liquidity evaporated, the investments rapidly lost value.

The Justice Department said the losses accelerated within weeks. “The cryptocurrency investments that Shetty made with the stolen funds soon began declining and by May 13, 2022, the value of the investments was nearly zero,” prosecutors said.

Once the losses became unavoidable, Shetty disclosed the transfers internally. According to the DOJ, he informed two executives at the company after the funds were effectively gone.

The company immediately terminated his employment after learning what had happened.

How Did the Criminal Case Unfold?

Federal prosecutors charged Shetty with wire fraud in May 2023. The case proceeded to trial more than two years after the original transfers occurred.

A jury convicted him on four counts of wire fraud in November 2025 following a nine-day trial in federal court. The conviction centered on the unauthorized transfer of corporate funds and the concealment of the transactions from the company’s leadership.

In addition to the two-year prison sentence, the court ordered Shetty to repay the stolen funds and serve three years of supervised release after completing his prison term.

How Does the Case Fit Into the Broader Crypto Enforcement Landscape?

The case unfolded during a turbulent period for the digital asset industry. Shetty’s unauthorized transfers took place months before the collapse of cryptocurrency exchange FTX in late 2022, one of the largest failures in the sector’s history.

FTX founder Sam Bankman-Fried was later convicted on multiple fraud charges and sentenced to 25 years in prison in 2024. He has filed an appeal of that ruling. As of Friday, the U.S. Court of Appeals for the Second Circuit had not issued a decision following arguments heard in November.

While the scale of the Shetty case is far smaller than the FTX collapse, prosecutors have treated both cases as examples of fraud involving misuse of funds connected to cryptocurrency businesses.

Investor Takeaway

Enforcement actions tied to crypto increasingly focus on traditional financial crimes such as wire fraud and misuse of funds rather than the technology itself.