Seattle startup’s ex-CFO accused of diverting $35M, losing it in crypto crash
seattletimes.comDiverted? Took employers money without permission? Why won’t they just use the word we have that describes this?!
Because the facts have not been settled in court, and that's the word you use until you know the correct one.
> that's the word you use until you know the correct one
"Accused of" and "allegedly" do this adequately. We don't know if this is embezzlement or if the firm's financial controls were so loose the CFO could plausibly and single-handedly "divert" cash like this. The title is generous, not incorrect.
If we don't know whether someone stole money the appropriate thing to do is say exactly that. Not make up something else and say that's what they might have done.
And how is an euphemism make it different?
Legally speaking, Theft implies both the act of taking, and intent to deprive the owner.
Presumably he’s going to claim he intended to be the hero who doubled their runway with a clever trick, in which case “diverting” is the appropriate word.
Embezzlement. The word you're looking for is embezzlement.
To save time reading the content-free article, the indictment itself says:
He personally, and without approval, transferred $35M of company funds to a second company he owned jointly with another person.
He then invested that money in UST, which subsequently crashed.
So in addition to "don't put all your money in SVB", start ups need to add : "don't setup signing authority on your bank accounts such that one person can drain tens of millions".
He was the chief financial officer. His job was to decide where to keep cash. So he would have that authority.
The argument is that he didn't (a) disclose what he was doing, nor (b) disclose that he owned the company where the money went.
I work at a very, very small startup. Even our very small startup has by-laws that cover this:
> An officer who is a party to, or who is a director or officer of or has a material interest in any person who is a party to, a material contract or transaction or proposed material contract or transaction with the Corporation shall disclose in writing to the Corporation, or request to have entered in the minutes of the meeting of Directors, the nature and extent of such person’s interest at the time and in the manner provided by the Act. Such a person may participate in any discussion related thereto but shall not vote on any resolution to approve the same except as provided by the Act.
I suspect this is pretty boiler plate stuff. The family corporation that my wife and I own doesn't have this text in its by-laws...but that's because it's a closely-held company. I'd certainly hope that a "real" VC-funded company would have this text.
Disagree. Actually disagree twice. The company had approved a treasury policy (apparently written by the CFO) that said cash had to be in t-bills or similar (therefore not unbacked stablecoin). But the policy is orthogonal to access control to the cash. You can have a CFO who decides where to put cash, but still require two officers to approve any transfer > $1M (for example). This neatly takes care of the problem where your CFO is a criminal, or has to pay ransom for his kidnapped wife, etc.
Small startups often don't have enough of a finance staff for proper separation of functions. That's the problem. Who in the transaction path had the authority to stop this guy without being fired? Probably nobody.
Here's the company.[1] It sells a "headless commerce platform".
The indictment in U.S. District Court charged Shetty with four counts of wire fraud. He is scheduled to be arraigned May 25.
Shetty’s attorney, Cooper Offenbecher, said in an emailed statement that he and his client had been in regular contact with prosecutors and disagreed with the decision to bring an indictment.
Damn...that is like 80 years, and even if the charges run concurrently and with plea, that may still 10 years easily (no parole in feds, only 15% reduction of time at best). Meanwhile kill someone on subway and only get 3 with parole. It's interesting how the legal system works that way. Except for pre-meditated murder, violent crimes tend to be punished less severely compared to fraud.
Rob someone of $1000 at gunpoint, get 10 years of hard time, rob many people of $50MM with a pen, get 2 years at a minimum security facility. Rob the American people of $10b, walk free. See the 2008 meltdown for details.
Only the most egregious frauds (Madoff, Skilling) result in any serious time.
Unrecovered money should be converted to extra years in prison at a rate of the average salary in the country. That would be a few hundred years of prison, right? Good enough deterrence for people to do bad things with money.
Minimum wage is a clear standard.
Anecdotally it’s very random. I’d need a corpus of statistics to agree or disagree with your claim that violent crime has excessively short sentences while white collar crime has excessively long sentences.
Many people believe the opposite, given the number of life savings affected by white collar crime. Here’s a judge who thinks that violent crime sentencing is insanely long: https://archive.is/YL2Ek
It opens with a 146-year strict minimum sentencing for a crime described as:
> The teenager’s crime was horrible: He robbed a small restaurant at gunpoint, ordered the patrons onto the floor and ended up having a shootout with one customer who happened to have a gun. Miraculously, the only person injured was the robber, who was shot in the foot.
Fraud so often goes unpunished, I suspect that it’s assumed if you’re caught dead to rights it’s not your first time.
I will eat my shoe if the median first-time white collar offender who only stole 35M gets 80 years.
Elizabeth Holmes just spent two years delaying her prison date, and she (and her co-conspirator) will only serve a decade for stealing ten times as much.
> Elizabeth Holmes just spent two years delaying her prison date, and she (and her co-conspirator) will only serve a decade for stealing ten times as much.
They didn't steal. They raised money from investors based on lies and squandered it. Of course, some of the cash made it back into their pockets, but it's not like they pocketed the whole $900m they raised based on their falsehoods.
>They raised money from investors based on lies and squandered it
Taking money under false pretenses is stealing.
How many years will Nevin Shetty end up spending in the federal penitentiary?