Washington Man Sentenced for Diverting $35M to Failed DeFi Platform

A Washington state man has been sentenced to two years in federal prison after prosecutors said he secretly diverted about $35 million from his employer into a cryptocurrency venture he controlled, only for the funds to collapse in high-risk decentralized finance investments. The case, announced by the U.S. Attorney’s Office for the Western District of Washington on March 5, 2026, adds to growing scrutiny of how corporate money is handled when executives move beyond approved treasury practices and into speculative digital-asset markets.

Washington Man Sentenced to 2 Years for Diverting $35M to Failed DeFi Platform

Federal prosecutors identified the defendant as Nevin Shetty, 42, of Mercer Island, Washington. According to the Justice Department, Shetty was sentenced in U.S. District Court in Seattle after a jury found him guilty on November 7, 2025, on four counts of wire fraud following a nine-day trial. Judge Tana Lin imposed the prison term on March 5, 2026, and also ordered Shetty to pay $35,000,100 in restitution and serve three years of supervised release after completing his sentence.

The government said Shetty had served as chief financial officer of a private software company beginning in March 2021. During that period, the company was raising capital and had adopted an investment policy designed to preserve cash in conservative vehicles such as money market accounts. Prosecutors said Shetty helped draft and circulate that policy to the board, making the later transfers especially significant in the government’s view.

According to the Justice Department, Shetty created a side business called HighTower Treasury in early 2022. Prosecutors said the platform had no outside customers and was used to receive company funds that were then deployed into decentralized finance, or DeFi, lending protocols promising yields of 20% or more. The government alleged that Shetty intended for HighTower to pay his employer a smaller fixed return while keeping the excess profits, creating a personal financial incentive tied to the unauthorized transfers.

How the $35 Million Was Moved

The Justice Department said the transfers occurred between April 1 and April 12, 2022. During that period, Shetty allegedly used wire transfers ordered from a Chase branch near his home to move $35,000,100 from his employer’s accounts to an account for HighTower Treasury. Prosecutors said no other executives or board members knew about the transfers at the time.

Once the money reached HighTower, prosecutors said it was placed into DeFi lending strategies that carried far more risk than the company’s approved treasury policy allowed. According to court records summarized by the Justice Department, the investments initially generated profit for Shetty and his business partner, with about $133,000 in gains in the first month alone. But the strategy quickly unraveled as crypto markets and related lending positions deteriorated.

By May 13, 2022, the value of the investments was “nearly zero,” according to the Justice Department’s account of the case. Prosecutors said Shetty disclosed what had happened only after the funds were essentially gone, at which point he informed two fellow executives and was immediately fired. The speed of the loss, from transfer to near-total collapse in roughly six weeks, became one of the most striking elements of the case.

Why the Sentence Matters

The case stands out because it combines traditional corporate fraud allegations with the mechanics of decentralized finance. DeFi platforms often advertise high yields, but those returns can depend on leverage, token incentives, liquidity conditions, and counterparty assumptions that can change rapidly. In this case, federal prosecutors framed the issue not as a failed investment judgment alone, but as a deliberate misuse of company funds in violation of internal policy and without board authorization.

Judge Lin underscored the broader damage during sentencing. According to the Justice Department, the judge told Shetty that the loss had “significant and severe effects on the company” and said his actions threw “into complete turmoil” the lives of 60 employees who were laid off. The court’s comments suggest the sentence was shaped not only by the dollar amount involved, but also by the downstream harm to workers and the company’s operations.

First Assistant U.S. Attorney Charles Neil Floyd said in the DOJ release that Shetty “brazenly schemed to line his own pockets with his employer’s money.” Assistant Special Agent in Charge Jonathan Dean of the FBI’s Seattle field office said the case showed how an executive’s access and trust can be exploited when internal controls fail to stop unauthorized transfers. Those statements reflect a broader enforcement message: crypto-related misconduct is being treated as financial fraud when it involves deception, misuse of entrusted funds, or false representations to employers and investors.

Impact on Companies, Investors, and Crypto Governance

For corporate boards and finance teams, the case is a warning about treasury governance. Startups and growth-stage companies often hold large cash balances after fundraising rounds, and those funds may be managed by a small group of executives. When oversight is weak, a CFO or other senior officer may have the practical ability to move money quickly, even if formal policy prohibits speculative activity.

Several lessons emerge from the case:

• Treasury policies must be specific about permitted investments and approval chains.
• Dual authorization and board-level visibility are critical for large transfers.
• Crypto exposure should be disclosed, monitored, and independently verified.
• Side businesses and conflicts of interest require active review, not just written policies.

The case also lands at a time when DeFi remains a contested part of the digital-asset industry. Supporters argue that decentralized protocols can improve market efficiency and expand access to financial services. Critics counter that high advertised yields often mask concentrated risks, governance weaknesses, and liquidity fragility. This sentencing does not resolve that debate, but it does show how quickly corporate funds can be destroyed when speculative crypto strategies are pursued outside approved controls.

A Broader Enforcement Signal

The Justice Department’s announcement fits into a wider federal pattern of pursuing crypto-related fraud and misuse of funds through established criminal statutes such as wire fraud. That approach matters because it shows prosecutors do not need a novel crypto-specific law to bring charges when the alleged conduct centers on deception and unauthorized transfers. In practical terms, the technology may be new, but the legal theory often is not.

According to the DOJ release, prosecutors had sought a nine-year prison sentence, arguing that the conduct was calculated and motivated by greed. The final sentence of two years may prompt debate over whether white-collar penalties in large-loss crypto cases are sufficiently severe. Some will view the term as relatively light given the scale of the loss, while others may note that sentencing can reflect multiple factors, including criminal history, trial findings, restitution, and federal guidelines.

What Comes Next

Shetty’s sentence includes more than prison time. In addition to restitution and supervised release, Judge Lin imposed a special condition barring him from serving as an officer or director of a company without prior permission from the probation office. That restriction points to a central concern in the case: the abuse of executive authority over corporate finances.

For the crypto sector, the case is likely to be cited in future discussions about institutional use of DeFi. Companies considering blockchain-based treasury strategies may face tougher questions from boards, auditors, insurers, and investors. Even where digital-asset tools are legal and potentially useful, the threshold for internal approval and risk management is likely to rise after a case involving a $35 million loss and criminal conviction.

The central lesson is straightforward. The Washington man sentenced to 2 years for diverting $35M to a failed DeFi platform did not simply make a bad bet, according to federal prosecutors; he moved company money into a side business he controlled, outside the rules he helped write, and the funds were nearly wiped out within weeks. For employers, regulators, and the crypto industry, the case is a sharp reminder that governance failures can turn financial experimentation into criminal liability.

Conclusion

The sentencing of Nevin Shetty closes one chapter in a case that blends startup finance, executive misconduct, and the volatility of decentralized finance. Federal prosecutors said the unauthorized transfers violated a conservative treasury policy, enriched a side business, and left the company reeling after the investments collapsed. With restitution set at $35,000,100, a two-year prison term, and three years of supervised release, the outcome sends a clear message that misuse of corporate funds in crypto markets will be pursued as fraud when deception and personal gain are involved.

Frequently Asked Questions

Who is the Washington man sentenced in this case?

The Justice Department identified him as Nevin Shetty, 42, of Mercer Island, Washington, a former CFO of a private software company.

What was he convicted of?

Shetty was convicted on four counts of wire fraud after a jury trial in federal court in Seattle.

How much money was involved?

Prosecutors said he moved $35,000,100 from his employer to a crypto platform he controlled.

What happened to the money?

According to the Justice Department, the funds were placed into high-yield DeFi lending protocols, and by May 13, 2022, the value of the investments was nearly zero.

What sentence did the court impose?

Judge Tana Lin sentenced Shetty to two years in prison, ordered restitution of $35,000,100, and imposed three years of supervised release.

Why is this case important for businesses?

The case highlights the risks of weak treasury controls, undisclosed conflicts of interest, and unauthorized crypto exposure by senior executives. It also shows that federal authorities are willing to use traditional fraud charges in crypto-related misconduct cases.