Key Notes
- Shima Capital is planning an ‘orderly wind-down’ following an SEC lawsuit against its founder, Yida Gao.
- The SEC alleges Gao and Shima Capital raised nearly $170 million using marketing materials with false and misleading statements about investment returns.
- Gao is accused of claiming a 90x return on an investment that actually returned 2.8x.
Crypto venture firm Shima Capital is initiating an “orderly wind-down” after the US Securities and Exchange Commission sued its founder, Yida Gao, for allegedly defrauding investors. The SEC’s complaint, filed November 25, accuses Gao and Shima Capital of making false and misleading statements while raising nearly $170 million.
The core of the SEC’s case rests on a pitch deck used between 2021 and 2023. This deck allegedly inflated Gao’s investment track record, claiming one prior investment delivered a 90x return when the actual figure was 2.8x.
“From at least May 2021 through March 2023, Gao and Shima Capital raised more than $158 million from 349 investors by offering and selling membership interests in a crypto-asset-focused venture fund called Shima Capital Fund I, using a marketing pitch deck that contained material misrepresentations about Gao’s investment track record,” the SEC complaint states.
In a separate scheme, the SEC alleged Gao raised $11.9 million for a Special Purpose Vehicle to invest in BitClout tokens, promising investors a significant discount. Gao allegedly acquired the tokens at a discount but sold them to the SPV at a higher price, personally retaining $1.9 million in undisclosed profits.
Following the SEC action, an internal email from Gao announced he would step down as managing director and that the fund would be liquidated. The US Attorney’s Office for the Northern District of California has also unsealed a parallel criminal action against Gao.
The Institutional Take
The Shima Capital collapse is a stark warning for the crypto VC sector. For years, performance metrics in private crypto funds have been notoriously opaque. The SEC’s focus on inflated track records signals a new compliance front.
Limited Partners will now intensify due diligence, demanding audited proof of returns and questioning the valuation of illiquid tokens. This action effectively puts the entire “trust me” model of emerging crypto fund managers on notice.
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