A Seattle-based startup called HighTower’s former Chief Financial Officer (CFO) has been charged with wire fraud for allegedly diverting $35 million of corporate assets to cryptocurrency ventures without permission. The ex-CFO, Venkata Meenavalli Shetty, is charged with transferring the money to an account at a cryptocurrency exchange between October 2020 and February 2021, according to the indictment, which was released on Tuesday.
Investigations revealed that Meenavalli transferred the money to purchase cryptocurrencies including Bitcoin, Ethereum, and Litecoin without the knowledge or consent of the company. The indictment also claims that Shetty misled his HighTower coworkers by saying that the money was being invested in a business called Fabric that had nothing to do with the cryptocurrency sector.
According to the indictment, Shetty intended to give Fabric a 6% interest rate on its investment while keeping the extra money for HighTower. However, it is claimed that Shetty used the money to buy cryptocurrencies rather than investing it in Fabric.
From the information gathered on the Startup company HighTower, they offer cloud-based services to the healthcare sector. Since its establishment in 2015, the company has raised close to $300 million. Fabric, on the other hand, is a startup that offers brands and retailers e-commerce services. After obtaining a $140 million Series C financing funded by SoftBank, its worth increased to $1.5 billion last year.
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HighTower Fired Shetty Since 2021, Issues Official Statement
HighTower issued a statement claiming that it had fired Shetty in February 2021 following the discovery of the illegal activities. The business added that it had taken action to recover the monies and had notified law enforcement of the situation. Indicting Shetty coincides with a global crackdown on fraud and illicit activity involving cryptocurrencies by regulators and law enforcement organizations.
It is no longer news that different types of scam activities, Ponzi schemes, and other fraudulent practices have plagued the cryptocurrency business, costing investors billions of dollars in losses. The story also emphasizes the dangers of investing in cryptocurrencies, which can undergo large price changes in a short amount of time due to their extreme volatility.
Due to the industry’s volatility and lack of regulation, some investors have made substantial profits from investing in cryptocurrencies, but others have lost their whole life savings.
While discussing this development, analysts said that the prosecution of the former CFO for allegedly illegally diverting $35 million of company funds to cryptocurrency investments serves as a warning of the dangers of cryptocurrency investment and the necessity of appropriate industry regulation and control.
They warned that this development emphasizes how crucial it is for businesses to take action to stop fraud and financial misappropriation within their structures, including setting up effective internal controls and supervision procedures.