CEOs' face state and federal criminal charges for misrepresenting the company's financial stability to investors, former employees, municipalities, the Board of Directors and to the general public
By Julia Dudley Najieb
FRESNO, Calif.--Bitwise Industries, Inc. announced this week that the company and its subsidiaries, Bitwise Industries, BWRD, LLC, Alpha Works, and Bruce's Bagels, have filed a voluntary petition for relief under Chapter 7 of the U.S. Bankruptcy Code, according to a June 29 company press release. The filing with the U.S. Bankruptcy Court for Delaware will result in federal appointment of a bankruptcy trustee to liquidate the company's assets and distribute any proceeds. According to The Business Journal, the company reported total financial liabilities of $252.03 million: of the total liabilities, $12.7 million is secured by property, $87,760 represents priority unsecured claims and $239.24 million is for non-priority unsecured claims.
The filing follows state and federal criminal investigations regarding the company CEOs, Jake Soberal and Irma L. Olguin Jr. who defrauded their employees and Board of Directors into believing the company was solvent--escaping with millions of dollars from their investors and their employees' paychecks and 401(K) accounts--ironically, the company had announced in February that they raised $80M investment led by Kapor Center and Motley Fool with participation from the Growth Equity business within Goldman Sachs Asset Management and Citibank. They had even expanded to Chicago's South Side, thanks to unsuspecting partner, The Comer Science & Education Foundation, according to the Bitwise press release. Bitwise Industries' CEO's had a history of taking advantage of Black and Brown and undeserved communities to usurp the local governmental benefits of "helping" these such communities in technology, hiring "Black" CEOs to receive the perks when buying blighted buildings and hiring from BIPOC communities. The company even received an investment from Goldman Sachs Asset Management as a part of the firm's One Million Black Women initiative, which was seeking to help narrow opportunity gaps facing Black women across key pillars including, job creation and workforce advancement; unfortunately, Bitwise Industries stole these peoples' salaries and money from their 401(K) contributions, leaving them also jobless without notice, never to payback the two-months worth of past due paychecks to such employees. Over 900 employees suffered in Bitwise Industries' nationwide ponzi scheme from Chicago and Ohio to Buffalo, NY and El Paso,Texas; 400 of those employees affected were working in the Central Valley between Fresno and Bakersfield. Individuals who live and represent these BIPOC communities were severely affected and are still suffering the loss of wages and income since the impromptu May furlough. How employees were notified of these furloughs was shocking indeed:
It was May 31, right after the Memorial Day weekend when rumblings from the downtown technology guru, Bitwise Industries, did unsuspecting employees and the Fresno, Calif. community have grave concerns about the rumors that turned out to be true. The two CEOs Soberal and Olguin were addressing their 900 staff members with some distressing news about payment—first they lied and told them they could not give electronic payments due to the change in the payment system, according to an anonymous former employee. The technology company announced to its employees that they would be giving them their paychecks through the snail mail. However, once those checks were received and deposited into some of the employees accounts already, these same "trusted" CEOs told their employees that the checks would probably not clear. The anonymous source shared that many employees had not been paid in a couple of months from past paychecks owed to them. This was a nightmare Bitwise was knowingly inflicting on its own employees; the 10 years of "success" was supposed to be a celebratory moment since the company's inception in 2013. Instead it was a duck-and-cover moment for 900 furloughed employees trying to shelter from an unexpected fallout with no warning. The first of the month was the same week; many of these former employees had no way to pay rent or their regular utility bills--Bitwise had tapped into their 401(K) contributions without remorse--therefore, there was no savings to withdraw from temporarily to save them from the actions of these charlatans because the brutal betrayal was real and solidified--no rumors.
How these two CEOs went from "trusted" to "busted."
Bitwise Industries touted itself in the press all over the country as the company doing "transformative things in technology, creating scalable digital solutions, offering services in Salesforce, DocuSign, and Digital Product Development—using a representative workforce in underestimated cities."
It boasted itself as the nationwide catalyst towards economic transformation, supposedly having "a proven record of year-over-year growth, pioneering a movement in the industry regarding diversity, equity and inclusion, reflected in the faces, lives, and humans in those we employ, those in which we partner, and communities we mean to lift up." This was the bogus mission and claim used to go from city to city where blighted neighborhoods suffered a lack-luster appearance and local community buy-in in which local city councils sought viable solutions--they thought that Bitwise Industries was the answer. However, they were the "scam" to get city councils to pour in more dollars to their scheme because they thought the company was "serving the undeserved populations."
So the question that every former Bitwise employee, Board of Director, and Central Valley resident seem to have is, "What did Jake Soberal and Irma L. Olguin Jr. do with the money?"
Perhaps the barrage of lawsuits filed will hopefully give some insight to the scheming plan these two had to not only steal from their employees, but also from their loyal, optimistic investors.
On May 31, 2023, Texas company, NICByte LLC, who financed five Bitwise real estate acquisitions filed a lawsuit in the Fresno County Superior Court alleging that Bitwise improperly sought out $30 million worth of loans and was unauthorized to list properties for sale, according to the The San Joaquin Valley Sun.
Furthermore the city of Fresno alleged that Bitwise had failed to pay property taxes for two years.
There were also reports that later surfaced that Soberal misrepresented a pending large investment from Goldman Sachs in exchange for hard money loans.
In regards to the former employees, according to The Business Journal, in the beginning of June, a federal class-action suit was filed on behalf of three prominent employees in federal court alleging that Bitwise was in violation of the Worker Adjustment and Retraining Notification (WARN) Act, which requires employers to give a 60-day notice before mass layoffs. Also included in the lawsuit are violations of the California Labor Code for non-payment of wages and 401(K) contributions.
On June 7, a class action suit representing eight employees was filed in the Fresno County Superior Court by attorneys Roger Bonakdar and Brian Whelan.
Since the company's recent fall from grace this summer, the Bitwise Industries Board of Directors announced June 3 that Soberal and Olguin had been terminated and that Ollen Douglass was named interim president, effective June 1, 2023.
The Board of Directors also announced that an investigation into what led to these current circumstances and events had begun, and that they are engaging with independent experts for support. In his role as Interim President, Douglass will oversee the investigation, drawing on his background in auditing and experience as a former chief financial officer.
"It was an incredibly difficult decision to suspend operations at Bitwise Industries and furlough the hardworking team members. The Board of Directors was recently made aware of the company's cash deficit by management and took immediate action as a result," said Douglass. "The Board of Directors is taking this matter very seriously. We are committed to determining the root cause and will continue to take swift action."
Ollen Douglass is the CEO of Hanover Street Advisors, a consulting firm focused on supporting early stage venture-backed companies. Prior to that, he launched and led Motley Fool Ventures, which invested in Bitwise. Douglass has more than 30 years of experience in finance, including as an auditor at KPMG, and has been recognized in accounting and venture capital for his work.
Where the Bitwise Industries movement began
Through a 2012 conversation over drinks Olguin had with her then intellectual property attorney, Soberal, who worked at Walter & Wilhelm Law Group in Fresno, the idea of Bitwise was born.
Olguin — a third-generation Mexican American and the first in her family to go to college — was working on making coding instruction available to disadvantaged members of her community; she met Soberal during her work, who wanted to take advantage of her vision to leverage the tech industry to effect change at the local level, starting in Fresno, CA, according to Tech Crunch.
The vision seemed earnest, as they started with establishing Geekwise Academy, a coding and tech skills bootcamp that teaches HTML and JavaScript to the under-privileged, starting in the Fresno, Calif. community.
By 2013, the bootcamp grew into Bitwise Industries; the CEOs then bought an 8,000 sq. ft. building in the heart of downtown Fresno, leasing out space to small tech companies.
Over the next nine years, the technology company would expand its business interest beyond Geekwise: They created two other company arms; a software division called Shift3 Technologies which was a safe-haven for Geekwise Academy alumni to join and help build apps and custom programs for small and medium-sized businesses., according to Forbes. The software division brought in 60% of the revenue for Bitwise. The commercial real estate would be another arm of the business. Olguin and Soberal initially raised $500,000 from investors to buy a 50,000-square-foot building in downtown Fresno that had been empty for 60 years since its last incarnation as a car dealership, according to Forbes. Soon the two CEOs would expand past Fresno, pitching to venture firms, including Kapor Capital, an Oakland, California, fund run by Lotus software founder Mitchell Kapor. The fund invests in tech startups with a social impact mission, which made Bitwise a good fit, the news article explained. By 2019, the the two CEOs acquired $27 million in a funding round that included New Voices Fund, run by African American beauty entrepreneur Richelieu Dennis.
By March 2022, Bitwise Industries had announced its massive expansion, adding locations in five new states: New York, Texas, Colorado, New Mexico, and Wyoming. It was certainly rapid growth after raising $100 million in venture capital to maintain all 10 cities across the country: Fresno, Bakersfield, Merced, Oakland, Toledo, OH, Buffalo, NY, El Paso, TX, Greeley, CO, Las Cruces, NM, and Cheyenne, WY.
"We started Bitwise Industries nearly a decade ago with the hope of helping our local community and since then, Bitwise has positively impacted thousands of lives, driven economic growth in underestimated cities, and is creating the tech workforce of the future," said Soberal at the time of the expansion. "Our goal is to bring our proven, repeatable approach to as many communities and people as possible. What has been successful in our first five cities, will become part of these new regions' stories of how investing in underestimated people and places can create a more inclusive and representative economy."
The company attracted BIPOC community members with claims such as, "The average student enters our program making less than $20,000 a year and upon exit goes on to positions that make more than $60,000 a year."
Even the Bitwise Industries Board of Directors bought into the optimistic stigma of Soberal's visionary rhetoric.
"What began as the Founders' dream to encourage and train underrepresented people in their hometown of Fresno, CA for jobs in the ever growing tech economy Bitwise Industries, has blossomed into a unique and proven scalable model," said Paula Pretlow, Independent Board Director at Bitwise Industries. "Bitwise is truly making a difference, not only in the lives of those who are gaining skills and employment in tech, but also in the cities where it operates and arguably, the nation as a whole."
By this time, Bitwise Industries had acquired some premier investors to its team of believers: Kapor Capital, Motley Fool Ventures, JP Morgan, ZOMA Capital, Candide Group, Gingerbread Capital, Promedica, M&T Bank, 43North Foundation, Acumen America, and the New Voices Fund. Their impressive portfolio would attract money from every where without question because every investor wanted to feel good about giving to under-served communities, feeling like they were making a difference through Bitwise Industries--until the ship went south and sunk ...and even until the very end, they were still collecting money from investors and avoiding federal taxes.
How did these two CEOs get away with this scam?
Bitwise Industries did not just collapse due to bad money management, but also through misrepresentation by using "underrepresented and/or under-served" communities as a focal point to get local and state subsidies and funding, which was a hustle that eventually was bound to come to light. Here's a nationwide example to explain the phenomenon.
As reported in the Washington Post on August 23, 2021, after the George Floyd incident, where Black America and others were outraged by the atrocious events filmed live via a mobile device, several corporations publicly made statements about what they would do, pledging to be a force for societal change and to fight racism and injustice, including violence against Black Americans, making a $50 billion promise. However, more than 90% of that amount was allocated to potentially profitable loans and investments, including mortgages. Just $4.2 billion was pledged as grants, and only $70 million went to organizations devoted to criminal justice reform, according to an article by MIT Management Sloan School.
Some corporate leaders spoke out where things went wrong after these big statements; the MIT Management Sloan School article explained that in the aftermath of Floyd’s murder, corporations did the right thing for the wrong reasons, out of guilt and discomfort of the incident itself.
“There are many problems with pledges, first being that it was a reaction to a horrific event and not actually a response to systemic racism,” said Malia Lazu a former Berkshire Bank executive vice president and current MIT Sloan lecturer who focuses on inclusion in the innovation economy.
The news article continued to explain how such big statements allowed corporations to reaffirm their power and reputation versus reparations; although, most meg-corporations who deploy such monies do not make sustainable, social impacts.
And now let’s talk about how Bitwise Industries is related to the scenario above; it, too, was a private corporation banking on disadvantage communities and Black communities, using the same dogmatic phrases to garner money from local and state municipalities. Instead of using money, they used technology as the way to freedom for underrepresented communities. The two CEOs would be the saviors; therefore, they were able to get funds from venture capitalists and municipalities who could not do the same efforts in technology and longtime blighted communities on their own. The foundation of the organization's principle sounded great; in 2022 it said this in public press releases:
Bitwise Industries creates a bridge between humans from marginalized communities and stories of systemic poverty to skills and resources necessary to access opportunities in the tech industry. By leveraging public-private partnerships, Bitwise provides paid apprenticeships to students to learn tech skills, connects them to meaningful tech opportunities, and builds vibrant buildings in underestimated cities to house their work. By upskilling disenfranchised humans, it empowers them to change their own lives—which ignites and transforms the regional economies of the cities in which Bitwise serves.
In 2023 the company operated on this morphed principle:
Bitwise Industries, a transformative technology company, creates scalable digital solutions, offering services in Salesforce, DocuSign, and Digital Product Development—using a representative workforce in underestimated cities. Bitwise is a nationwide catalyst towards economic transformation, has a proven record of year-over-year growth and has been nationally recognized for its work. Bitwise has pioneered a movement in the industry regarding diversity, equity and inclusion reflected in the faces, lives, and humans in those we employ, those in which we partner, and communities we mean to lift up.
Also, Bitwise Industries' CEOs create folly relationships with its employees, making them supposedly feel as "equals." In a Fresno Bee Opinion piece by former Bitwise Industries marketing director, Katrina Riggs reflected on her time there. She had joined the Bitwise team in 2021. She commented on how one of the co-CEOs, Olguin Jr., would get matching tattoos with her employees. Olguin Jr. even gave her a hug after it was said and done--what an ironic twist to the Memorial Day message delivered from the same CEO bonding through a tattoo moment, a bitter moment forever tattooed in the memories and minds of 900 former, vulnerable Bitwise employees.
This is an ongoing news story with updates to come as the cases unfold.