Shima Capital, once one of the most prolific early-stage investors in the Web3 space, has begun a formal wind-down of its operations weeks after the Securities and Exchange Commission (SEC) filed a fraud complaint against the company. According to journalist Kate Irwin, the complaint alleges that Shima Capital engaged in a systematic scheme to defraud investors and misrepresent the firm’s performance history.

Irwin cites an internal email sent to portfolio company founders in which founder Yida Gao said he is exiting his role and initiating an orderly liquidation of the fund. Gao reportedly expressed regret for what he termed “misguided decisions” and apologized for letting stakeholders down.

This marks a swift fall for a firm that launched in 2021 with $200 million in capital and quickly became a prominent backer of high-profile projects, including Berachain, Monad, Pudgy Penguins, and Gunzilla.

The core of the SEC’s complaint centers on allegations that Gao significantly inflated his investment track record to attract capital. Regulators claim that marketing materials touted a 90-fold return on a prior investment that had actually generated only a 2.8-fold return. These documents were allegedly used to solicit more than $158 million from 349 investors who were led to believe the firm possessed a nearly unparalleled success rate in the digital asset sector.

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When news of these discrepancies began to surface, Gao reportedly attempted to dismiss them to his largest investors as mere “clerical errors.” In 2024, Gao was accused of funneling investments into a secret offshore entity he wholly owned without disclosing the arrangement to investors.

Beyond performance claims, the SEC also highlighted a secondary scheme involving a special purpose vehicle, or SPV, created to invest in Bitclout tokens. The complaint alleges that Gao misled investors by claiming he would use his unique access to secure tokens at a substantial discount for their benefit. Instead, the SEC asserts that Gao purchased the tokens at a discount himself and then resold them to the SPV at a higher price. This maneuver allowed him to pocket approximately $1.9 million in undisclosed profits, even as the value of the underlying assets for the investors eventually plummeted.

The wind-down is set to be managed by independent overseers to ensure a transparent transition of assets. Gao has reportedly engaged FTI Consulting to manage the monetization of the fund’s holdings and has consented to a settlement that includes a permanent injunction and nearly $4 million in penalties. This development leaves dozens of portfolio companies navigating the uncertainty of a lead investor in liquidation during a critical period for institutional crypto adoption.

• Why is Shima Capital winding down? The firm is shutting down after an SEC fraud complaint alleging inflated performance claims and investor deception.
• What role did founder Yida Gao play? Gao resigned and initiated liquidation after admitting to “misguided decisions” highlighted in the SEC case.
• How much investor money is implicated? Regulators say Shima raised over $158 million using misleading marketing materials and undisclosed profit schemes.
• What happens to Shima’s portfolio companies now? Independent overseers and FTI Consulting will manage asset liquidation, leaving startups navigating the loss of a major backer.

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