Screenshots of an internal email detailing plans to wind down Shima Capital have surfaced online, just days after the U.S. Securities and Exchange Commission sued the crypto enterprise firm and its founder over allegations of investor fraud.
On Nov. 25, the SEC charged Shima Capital Management LLC and its founder Yida Gao with making false and misleading statements while raising nearly $170 million from investors, the agency announced on Dec. 3.
The lawsuit, filed within the U.S. District Court for the Northern District of California, alleged that Gao inflated his investment track record through marketing materials that he used to lift capital for Shima Capital Fund I between 2021 and 2023.
According to the SEC, Gao claimed that a previous investment produced a 90x return, when the actual return was closer to 2.8. The regulator also alleged that Gao told investors that discrepancies within the pitch deck ought to be publicly disclosed and that the issues were because of clerical errors.
The SEC claims undisclosed profits of $1.9 million
Separately, the SEC alleged that Gao raised about $11.9 million through a special purpose vehicle tied to BitClout tokens and told investors they might be protected through discounted token purchases. While Gao acquired tokens at a reduction, the SEC said he sold them to the SPV at a better price without disclosing that he personally retained about $1.9 million in profits.
In a Wednesday post on X, crypto journalist Kate Irwin shared screenshots of an email Gao allegedly sent to Portfolio founders. In the screenshots, Gao reportedly said he would step down as managing director of Shima Capital and that the fund would undergo an “orderly dissolution.”
Gao's alleged email to portfolio corporations. Source: Kate Irwin
The screenshots purportedly show Gao explaining that the SEC and Justice Department's actions were related to his personal conduct and never that of Shima Capital's portfolio corporations, and claiming that no fines were imposed on the corporate.
The screenshots also show that independent advisors from FTI Consulting and FTI Capital Management would oversee the settlement process and monetization of the investments, while Shima's finance team would remain in place. Gao reportedly said he would proceed to be involved in portfolio support “as permitted,” but without management oversight.
Cointelegraph couldn’t independently confirm the e-mail. We reached out to Shima Capital and a few of the fund's portfolio corporations for confirmation but had not received a response on the time of publication.
Shima Capital launched with a $200 million debut fund
In 2022, Shima Capital announced the launch of its first enterprise fund, Shima Capital Fund I, raising $200 million to support early-stage blockchain startups. The company, founded by Gao in 2021, said the fund has received support from plenty of outstanding investors, including Dragonfly Capital, Animoca Brands, OKX Blockdream Capital, Republic and Andrew Yang.
Shima Capital has invested in quite a few crypto projects including Humanity Protocol, Berachain, Monad, Pudgy Penguins, Shiba Inu and lots of others.
