SEC Charges Shima Capital Founder in $170 Million Crypto Scheme
The U.S. Securities and Exchange Commission announced that it has charged Yida Gao, founder of Shima Capital Management LLC, with making false and misleading statements to investors while raising more than $169.9 million across two crypto-focused investment vehicles.
According to the SEC, between May 2021 and March 2023, Gao and Shima Capital raised over $158 million from 349 investors for Shima Capital Fund I, using a pitch deck that materially overstated Gao’s past crypto investment performance. For example, the deck claimed that one investment produced a 90x return, when the actual result was 2.8x. Other returns were similarly overstated. When Gao learned that a prominent news publication was preparing an article highlighting the discrepancies, he allegedly contacted major investors and falsely attributed the issues to “clerical errors.”
Additionally, in a separate offering from April to May 2021, Gao raised $11.9 million from investors for a special purpose vehicle, or SPV, he formed for the purported purpose of making investments in BitClout, a blockchain social network for which BitClout tokens were the native crypto asset.
Gao reportedly told investors he could secure BitClout tokens at a 20% to 40% discount, and while he did obtain the tokens at a discounted price, the SEC stated that he did not pass this discount on. Instead, he resold the tokens at a higher price, keeping $1.9 million in undisclosed personal profit. Ultimately, after BitClout’s price collapsed by roughly 95%, the SPV returned under $450,000 of the $11.9 million raised, a loss of more than 96%.
Gao consented to a bifurcated settlement that includes a permanent injunction; $3.92 million in disgorgement, plus $304,622 in interest; an officer-and-director bar; a conduct-based injunction; and civil penalties to be determined later.
Shima Capital separately consented to a permanent injunction and agreed to additional compliance undertakings. Both settlements are subject to court approval.
A parallel criminal case against Gao was unsealed by the U.S. Attorney’s Office for the Northern District of California.
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