Shima Capital Collapses Following SEC Fraud Charges and Liquidations

Shima Capital, a venture capital powerhouse once synonymous with the 2021-2024 crypto boom, is officially in a state of liquidation following a devastating fraud lawsuit filed by the U.S. Securities and platform Commission (SEC). The lawsuit, brought against the firm and its founder Yida Gao in late November 2025, alleges a sophisticated multi-year scheme to defraud investors of over $169 million. The fallout has been immediate, with Gao resigning and the fund notifying portfolio companies of its intent to dissolve, marking one of the most high-profile collapses in the crypto VC sector.

Allegations of Fabricated Success and “Clerical Errors”

The core of the SEC’s complaint centers on material misrepresentations made during the raising of “Shima Capital Fund I.” Between 2021 and 2023, Gao allegedly used marketing pitch decks that contained wildly inflated investment returns to lure in 349 separate investors. Most notably, the SEC claims Gao boasted of a “90x return” on a prior investment when, in reality, the actual return was a modest 2.8x. When investigative journalists began uncovering these discrepancies in 2025, Gao allegedly called his largest backers to falsely claim the errors were merely “clerical” in nature, an attempt to prevent a mass withdrawal of capital.

The legal pressure is compounded by a secondary scheme involving a Special Purpose Vehicle (SPV) created to purchase BitClout tokens. The SEC alleges that Gao told investors he had unique access to purchase these tokens at a 20-40% discount, promising to pass those savings on to protect the fund against market volatility. Instead, the complaint details how Gao purchased the tokens at the discount personally and then resold them to the SPV at a markup, pocketing roughly $1.9 million in undisclosed profits. This “double-dipping” at the expense of his own investors is cited as a primary violation of the Investment Advisers Act.

Impact on the Broader Ecosystem and Legal Reanswer

The downfall of Shima Capital sends shockwaves through the dozens of projects in its portfolio, including high-visibility names like Berachain and Monad. As the liquidation process begins, there are growing concerns about the secondary market impact as Shima’s vested and unvested token allocations are potentially offloaded to cover legal costs and investor redemptions. This comes at a precarious time for the market, which has already been battered by high-leverage liquidation events and macro uncertainty.

In a recent development, Yida Gao has reportedly consented to a “bifurcated settlement,” agreeing to pay over $4.2 million in disgorgement and interest, while accepting a permanent injunction from future securities violations. However, the civil penalty amount and a potential permanent officer-and-director bar are still to be resolved. Parallel criminal investigations by the U.S. Attorney’s Office for the Northern District of California remain active, suggesting that Gao’s legal troubles may extend beyond financial penalties. For the crypto industry, the Shima saga serves as a sobering reminder of the regulatory risks facing “prestige” funds that lack robust internal compliance and transparency.