Shima Capital Plans to Wind Down After SEC Charges of Investor Fraud

• Shima Capital to wind down after SEC fraud allegations surface.
• Gao steps down as managing director amid ongoing SEC investigation.
• SEC claims Shima Capital misled investors, inflated investment returns.

Shima Capital, the blockchain-focused venture firm, is reportedly preparing to wind down following recent allegations of investor fraud brought forth by the U.S. Securities and Exchange Commission (SEC). According to leaked screenshots of an internal email, the company’s founder, Yida Gao, informed portfolio company founders that he would step down as managing director and that the fund would undergo an “orderly wind-down.”

The SEC’s lawsuit, filed on December 3, accuses Shima Capital and Gao of misleading investors while raising almost $170 million for the firm. The SEC claims that Gao misrepresented his previous investment track record, including falsely claiming that one investment had yielded a 90x return, when the actual return was closer to 2.8x.

Gao allegedly told investors that discrepancies in the pitch deck were due to clerical errors, misleading them in the process.

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Additionally, the SEC’s complaint points to a $1.9 million undisclosed profit that Gao retained from selling BitClout tokens to an investor special purpose vehicle at a price higher than the discounted rate at which he had purchased them.

Plan for the Firm’s Wind-Down

According to the screenshots shared by crypto journalist Kate Irwin, Gao outlined the steps that would follow his departure from the firm. While he would no longer hold management control, Gao stated that he would continue to provide portfolio support as permitted. The firm has reportedly enlisted independent advisers from FTI Consulting and FTI Capital Management to manage the wind-down and the monetization of its investments.

Despite the SEC’s actions against Gao, he assured that Shima Capital’s portfolio companies were not implicated and that no fines had been imposed on the company. The finance team will reportedly remain in place to handle the wind-down process.

The firm had previously launched Shima Capital Fund I in 2022, raising $200 million to support early-stage blockchain startups. It received backing from major investors, including Dragonfly Capital and Animoca Brands. However, these developments now cast doubt on the future of Shima Capital and its ongoing ventures in the blockchain space.

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