The SEC filed fraud charges against Puerto Rico-based registered investment adviser Shima Capital Management LLC and its owner, Georgia resident Yida Gao, for making false and misleading statements to investors. According to the SEC’s complaint, from at least May 2021 through March 2023, Gao and Shima Capital raised more than $158 million from 349 investors by offering and selling membership interests in a crypto-asset-focused venture fund called Shima Capital Fund I, using a marketing pitch deck that contained material misrepresentations about Gao’s investment track record. The pitch deck listed prior investments in 28 crypto assets, showing entry and exit prices and return multiples. The SEC noted that all of the return multiples were inaccurate, with several significantly overstating returns. For example, Gao claimed that one of the investments had generated a 90x return, when he apparently only earned a 2.8x return. The SEC noted that a prominent news publication published an article regarding the apparent discrepancy in the pitch deck, and when Gao became aware that such an article was pending, he called several investors and falsely told them that the discrepancies arose from mere clerical errors. The SEC further alleged that Gao raised an additional $11.9 million from five investors by offering and selling membership interests in a special purpose vehicle called the “BitClout SPV.” According to the complaint, Gao claimed that he could purchase BitClout tokens at a 20–40% discount and that this substantial discount would protect investors’ investments, even if the price of BitClout tokens later dropped. The complaint alleges that, while Gao did purchase BitClout tokens at a substantial discount, he sold them to the BitClout SPV for a higher price, without disclosing to investors that he kept $1.9 million in profit for himself. Gao has agreed to an officer and director bar and disgorgement plus interest of more than $3.9 million, with a penalty to be resolved upon a motion by the SEC. While the facts in this case appear egregious, they serve as a reminder regarding the importance of reporting accurate investment returns with full support and avoiding conflicts of interest that benefit firm principals at the expense of investors.