The two founders and former chief executives of Bitwise, the California tech company with lofty Toledo expansion plans that collapsed suddenly earlier this year, surrendered to federal authorities Thursday after being charged in an alleged $100 million fraud scheme.
Those two former Bitwise leaders — who founded the firm specializing in software development, work force training, and workspace-sharing about a decade ago in Fresno, Calif. — are Jake Soberal, 37, and Irma Olguin, Jr., 42. Ms. Olguin, Jr., is a 2004 University of Toledo graduate.
Both pleaded not guilty in their first appearance in federal court in Fresno on Thursday afternoon, according to news reports and a release from the U.S. Attorney’s Office for the Eastern District of California. The federal complaint follows an investigation by the FBI and IRS in recent months, which included dozens of interviews and a review of hundreds of thousands of pages of company documents.
In September, “the government interviewed Olguin, Jr. and Soberal, and they have admitted to significant criminal misconduct,” according to the complaint, which added that the investigation found that the alleged misconduct “caused more than 100,000,000 in losses.” The court records also says the two former leaders have maintained “they were the only ones at Bitwise who were involved in the criminal activity.”
The company suddenly laid off all 900 of its employees nationwide, including 18 in Toledo, on May 29, saying it had encountered dire cash-flow issues.
Bitwise, partnering with ProMedica, spearheaded a $38 million overhaul of UpTown's Jefferson Center and promised to hire at least 378 people to fill it, raising hopes that the sudden influx of tech workers could help reinvigorate much of the surrounding area.
Beyond leaving that new building empty, the company also walked away from a downtown Toledo co-working space, and a plan to build a new downtown daycare center.
Bitwise had also planned to grow its operations in a handful of other cities around the country, several of them similar to Toledo in that they were not known previously as tech hubs. A central theme of the company’s work was offering low-income residents tech training.
Bitwise's sudden disintegration caught local leaders by surprise. Many said they never heard from any leaders of the company after the layoff.
The company's board fired Ms. Olguin, Jr. and Mr. Soberal after the collapse, with members saying they had been in the dark. The former co-CEOs have made few public comments since then.
“The defendants could have chosen simply to admit the failure of Bitwise’s business model," U.S. Attorney Phillip A. Talbert said in a Thursday statement. "Instead, they used lie after lie to pull over $100 million into a dying venture through fraud.
"Olguin, Jr., and Soberal fabricated bank statements, lied to investors, provided false financial information to their board of directors, forged documents, and used buildings Bitwise no longer even owned as collateral for loans, all while lining their own pockets," Mr. Talbert added.
The complaint alleges that Ms. Olguin, Jr. and Mr. Soberal lied to their board, investors, lenders, and others about the company's finances in order to get loans and investments. They also allegedly faked presentations and investor materials, forged bank statements and audits, and other financial records, court records say, as they sought to inflate the firm’s revenues, cash balances, and property holdings.
"Much of the money went towards paying Bitwise’s payroll and fringe benefits, including Olguin, Jr. and Soberal’s $600,000 per year salaries, outfitting the company’s office spaces, and repaying debts owed to prior lenders," the federal news release announcing the charges states.
Federal officials said the duo each face up to a maximum of 20 years in prison and a $250,000 fine.
The Securities and Exchange Commission also on Thursday announced charges against Mr. Soberal and Ms. Olguin, Jr., related to misleading investors. That complaint was filed in the same California federal court. The SEC said the former CEOs already have agreed to certain penalties related to the charges.
"We allege that Soberal and Olguin resorted to blatant fraud, including the creation of fake financial documents, to deceive investors and raise money,” Monique C. Winkler, regional director of the SEC’s San Francisco office, said in a statement.
“In one instance, the defendants allegedly conspired to send a purported screenshot to investors of a company bank account showing a cash balance of $23.4 million," she said. "In actuality, the account had only $325,100 in it. That’s not a bank error — that’s fraud, and the SEC is taking action to hold the defendants accountable.”
In court records, no attorneys are listed for either Mr. Soberal or Ms. Olguin.
First Published November 9, 2023, 9:10 p.m.
