FRESNO, Calif. — The two founders of a California-based technology company that, among other things, left a newly renovated Toledo building without a tenant when it abruptly ceased operations last year, received nine-year and 11-year federal prison terms for wire fraud.
Senior U.S. District Judge John C. Coughenour also ordered Irma Olguin, Jr., and Jake Soberal to repay the $115 million they bilked from investors in Bitwise Industries by falsifying the company’s financial statements.
Judge Coughenour’s nine-year sentence for Olguin, 43, and 11-year sentence for Soberal, 38, on Tuesday were slightly less than the 151-month terms (12 years and 7 months) that federal prosecutors for the Eastern District of California requested for their convictions of single counts of wire fraud and conspiracy to commit wire fraud.
Saying the fraud carried out was “willful and egregious,” U.S. Attorney Phillip A. Talbert said the sentences served as a reminder of the hazards of financial crimes.
“Defendants likened themselves to gods and joked about deceiving their well-intentioned investors while committing a massive fraud,” Mr. Talbert said in a statement issued Tuesday. “They lied repeatedly to pull in over $100 million to a dying business venture that they knew never had any meaningful revenue. To make themselves rich and keep up the façade, they used fabricated bank statements, false financial information, forged documents, and fake loan collateral.”
Olguin and Soberal were charged after Bitwise filed for protection in June, 2023, under Chapter 7 of the U.S. Bankruptcy Code, under which the company sought to liquidate. Investigators determined Bitwise falsified financial documents to show robust profits, rather than practically zero income, to woo potential investors.
Toledo was to have been home to Bitwise’s first operations outside California.
Its local expansion was announced in February, 2021, by ProMedica, which in 2019 bought the Jefferson Center from Toledo Public Schools for $1.2 million.
ProMedica said it was partnering with the California firm to fulfill a mission to support work force development in diverse communities at the 100,000-square-foot former post office.
Bitwise similarly described itself at the time as a “tech ecosystem, activating human potential to elevate underdog cities around the country.”
Lawyers for both defendants had suggested five-year sentences for both Olguin and Soberal.
A lengthy sentencing memorandum for Olguin, who graduated from the University of Toledo College of Engineering in 2004 with a computer science degree, described her impoverished upbringing and argued that her conduct with Bitwise was never geared toward self-enrichment.
“As Bitwise began to fail in mid-2022, Mr. Soberal embarked on a desperate campaign to raise money for the singular goal of keeping the company afloat and its hundreds of employees employed,” the other co-founder’s lawyers wrote. “In his misguided effort to save Bitwise, Mr. Soberal resorted to lies that became more and more egregious as the situation became more and more desperate.”
But prosecutors countered that text messages between the two reflected knowledge long before its collapse that the company was failing and the wealthy investors they continued to solicit would likely never see a return.
The prosecutors’ memorandum made no mention of the $38 million spent in Toledo to ready the Jefferson Center for occupancy by 378 workers Bitwise said it would employ.
But a Sacramento-based FBI agent did note the overall losses caused by the fraud.
Soberal and Olguin “repeatedly lied to investors and lenders to keep their massive Ponzi scheme afloat, despite knowing that the business model would never generate positive revenue. The $115 million loss is significant, but the damage to the professional reputations of innocent parties and the loss of more than 900 jobs and associated benefits employees depended on will have a lasting, negative impact on the economy and individual lives,” FBI Sacramento Special Agent in Charge Sid Patel said in a statement.
Financing for the renovations in Toledo included a combined $17.5 million worth of bond financing jointly issued by the Toledo-Lucas County Port Authority and the Development Finance Authority of Summit County.
JobsOhio provided a $1.5 million grant and a $3 million loan as well as a short-term $3 million “bridge loan,” while more than $10 million in combined state and federal historic tax credits were approved, as well as $13.2 million worth of Federal New Market Tax Credits, which incentivize certain development projects in distressed communities.
ProMedica kicked in $1.8 million toward the renovations as well. The building has remained unoccupied since work was completed.
Holly Kemler, a port authority spokesman, said ProMedica was current on the debt service for the bond financing.
At the time of Bitwise’s collapse, ProMedica held 23 percent of the building’s equity while Bitwise officially had title to 77 percent of the building. Among 900 workers Bitwise abruptly furloughed on Memorial Day in 2023 — and officially laid off a short time later — were 18 in Toledo.
Tausha Moore, a ProMedica spokesman, said the company considers itself a victim of the Bitwise fraud.
“Since Bitwise was slated to be the primary tenant in the Jefferson Center and ProMedica oversees the facility, we have assumed the role of seeking new tenants,” Ms. Moore said. “Since completing the renovations, we have been negotiating with several potential tenants. We hope to have tenant lease agreements in the near future.”
First Published December 18, 2024, 1:33 a.m.
