SEC Sues Shima Capital Founder as Fund Winds Down

The SEC just dropped a lawsuit on Shima Capital's founder—right as the firm shuts its doors.

Regulators pounce on a shrinking fund

No specific figures were disclosed in the original filing, but the timing couldn't be more symbolic. The legal action lands precisely as the venture capital fund enters its wind-down phase, painting a stark picture of regulatory scrutiny meeting a declining asset base.

It's the classic finance playbook: chase the manager when the money's already left the building.

Misleading investment claims

The complaint filed by the SEC describes how Gao made false claims about his investment experience using a marketing pitch deck. For example, one claim was that a previous investment had yielded 90 times the return on investment, whereas Gao had actually gained only 2.8 times. 

Furthermore, when a news outlet was set to publish a story about discrepancies, he allegedly contacted investors about mistakes made in the claims, because they had resulted from mere errors made by clerical staff.

Moreover, Gao also conducted a BitClout SPV in 2021, raising approximately 11.9 million US dollars. He promised to acquire tokens at a discount of 20-40%. However, the truth is that he resold these tokens at a higher rate, reaping an undisclosed profit of 1.9 million US dollars.

Gao and Shima Capital are charged with wilful violations of several securities laws in the United States, including Sect. 17(a) of the Securities Act and Sect. 10(b) of the Securities Exchange Act. Gao settled in a bifurcated settlement, disgorging around 4.2 million dollars in disgorgement and prejudgment interest. Shima Capital agreed to settlements mandating future compliance with SEC rules. These are pending court approval.

Broader regulatory context

This incident is part of a wider clampdown on crypto ventures. In September, the SEC allegedly issued a Wells notice regarding Paxos Trust Co. for possible infringement regarding its stablecoin, the BUSD. The agency claimed that Paxos had sold unregistered securities, although it is difficult to distinguish issuance from listing. Binance, a platform having the licensing rights for the BUSD, stated:

The Shima Capital case also comes amid other major crypto enforcement actions, like the charges against Terraform Labs. Its Founder, Do Kwon, pled guilty in August 2025 to wire fraud and securities conspiracy. Kwon’s collapse of TerraUSD led to losses of around $40 billion. If South Korean authorities continue their investigation, he could face up to 30 more years in prison.

Shima Capital’s collapse shows how closely the SEC is watching crypto firms. Investors need to be careful and check fund claims and do their own research before putting in money. 

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