Crypto VC Investor Shima Capital Struggles to Establish Long-Term Partnership with Independent Auditor

Shima Capital, a prominent venture fund in the crypto sector, has encountered challenges when seeking for a long-term independent auditor.

The VC firm, which has raised $200 million for its debut fund and invested in nearly 200 startups, has not undergone a formal audit since its launch in 2021, according to a recent report.  

The company’s failure to find an auditor comes despite the fact that it has attracted high-profile backers including billionaires Bill Ackman and Alan Howard, former presidential candidate Andrew Yang, and industry heavyweights like Animoca Brands and Dragonfly Capital. 

Still, the Puerto Rico-based firm has encountered challenges when it comes to finding a long-term independent auditor, according to documents reviewed by The Block.

Auditors Walk Away From Shima Citing Risk Parameters

The documents, which included an investor presentation from the summer of 2021, reveal that Shima attempted to engage the auditing firm Richey May & Co. to provide tax and auditing services. 

However, Stephen Vlasak, a partner at Richey May, has confirmed that the firm never officially engaged or issued any audit reports for Shima Capital.

Another version of the same presentation suggested that Shima turned to BDO as a potential auditor. 

Yida Gao, the founder of Shima Capital, mentioned BDO USA as Shima’s potential auditor in a court filing, and BDO Cayman was named as the auditor in a separate investor update in 2022. 

However, in March 2023, BDO informed Shima that it fell outside the firm’s risk parameters due to a policy change. 

Marcum LLP, which recently started appearing in Shima’s regulatory filings, was then engaged as an auditor. However, it was determined that Shima did not meet Marcum’s risk parameters.

A form ADV filed in May this year suggests the fund’s annual statements are subject to an annual audit.

In response to inquiries, a spokesperson for Shima reportedly stated that the company is currently engaging with multiple auditors but did not provide further details.

Despite the difficulties in finding an auditor, Shima Capital has emerged as one of the most active investors in the crypto sector. 

However, the fund has also faced controversies, including a lawsuit filed by Gao’s former employer, Adam Struck of Struck Capital Management, and concerns raised about the accuracy of its investor presentations.

Crypto Funds Struggle to Find Auditors

Shima is not the only crypto VC facing challenges in getting their accounts signed off. 

Animoca Brands, another active web3 investment firm, recently released audited accounts for 2020, after significant delays. 

Animoca Chair Yat Siu explained that the company’s financial auditing process required addressing unique complexities associated with token sales and NFTs.

It is worth noting that crypto firms are also struggling with a lack of funding amid the meteoric rise of artificial intelligence (AI), which has captured the attention of VC firms globally

In the first quarter of this year, the AI industry raised approximately $18 billion in funding, with some of that funding coming at the expense of crypto companies.