Day managed the Australian Idol winner via his company 6 Degrees between 2009 and 2017 before their relationship ended.
He pleaded not guilty to dozens of charges alleging he embezzled almost $900,000 owed to Sebastian through royalties, performance and ambassador fees.
But a NSW District Court jury found him guilty on 34 counts of fraud in June last year, while he was acquitted on a further 13 charges.
Day was sentenced to up to four years in jail and ordered to repay about $624,000 after the verdict.
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But his convictions were quashed by the NSW Court of Criminal Appeal today.
The court is yet to publish its reasons for the decision.
Day is due to be arraigned for a new trial on December 15 in the District Court.