Screenshots of an internal email reportedly show Yida Gao resigning as the managing director of Shima Capital, along with plans for the fund’s organized closure. This comes in the wake of a lawsuit by the US Securities and Exchange Commission (SEC), which has accused the firm and Gao of fraudulent activity during fundraising efforts.

On November 25, the SEC made allegations against Shima Capital Management LLC and Yida Gao for providing false information to nearly $170 million in investments they gathered. The legal complaint, lodged in the US District Court for the Northern District of California, claims that Gao exaggerated his prior investment successes in their promotional content for Shima Capital Fund I, particularly during the 2021-2023 period.

The SEC pointed out that Gao had asserted that one of his past investments yielded a return of 90 times the initial amount, when the actual return was only about 2.8 times. Furthermore, when discrepancies in the information were anticipated to be publicly addressed, Gao reportedly dismissed them as mere clerical mistakes.

SEC Points to $1.9 Million Undisclosed Profit

In another matter, the SEC claimed that Gao secured approximately $11.9 million via a special purpose vehicle linked to BitClout tokens, misleading investors by promising protection through at-cost token purchases. Although Gao indeed bought the tokens at a discount, the SEC alleged that he then sold these tokens to the SPV at a higher price, while keeping roughly $1.9 million in profits undisclosed.

In a Wednesday post on X, crypto journalist Kate Irwin shared screenshots of an email purportedly from Gao to the portfolio heads. In it, he announced his resignation as Managing Director and indicated that the fund would go through an ‘orderly wind-down.’

The exposed screenshots show Gao stating that the actions taken by the SEC and the Department of Justice concerned his personal conduct rather than that of the portfolio companies. He also emphasized that the company bore no penalties.

According to the information shared, independent advisors from FTI Consulting and FTI Capital Management will supervise the winding down and investment monetization process, while Shima’s financial team will stay in operation. Gao mentioned he would provide support for portfolio management ‘as permitted,’ without asserting control.

Cointelegraph could not verify the email independently. Attempts to reach Shima Capital and its portfolio projects for confirmation received no replies by the publication time.

Shima Capital’s Introduction to the Industry

In 2022, Shima Capital announced the inauguration of its first venture fund, Shima Capital Fund I, raising $200 million to aid early-stage blockchain companies. Established in 2021 by Gao, the firm noted financial support from several notable investors including Dragonfly Capital, Animoca Brands, OKX Blockdream Capital, Republic, and Andrew Yang.

Shima Capital has invested in various cryptocurrency projects, including Humanity Protocol, Berachain, Monad, Pudgy Penguins, and Shiba Inu, among many others.