In its original sense defalcate meant "to cut off by a sickle." Its Latin source, defalco, was formed from the preposition de, off, and falx, sickle, and that was the literal sense in which the word was employed in Medieval Latin. After its introduction into English speech, however-possibly from the notion that grasses cut with a sickle are then to be taken away-defalcate was used in the extended sense, "to take away." This has become its usual meaning, chiefly applied to the embezzlement of money.
from Thereby Hangs a Tale: Stories of Curious Word Origins by Charles Earle Funk
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