The U.S. Securities and Exchange Commission (SEC) and Department of Justice (DOJ) have charged the former co-CEOs of Bitwise Industries, Inc. with wire fraud. The charges in a California federal court this week stem from events in May 2023, when the executives were found to be falsifying company financial records while raising over $100 million from investors in 2022.
Bitwise Industries was a Fresno, California-based firm that created “technology solutions in Salesforce, DocuSign, and digital product development by leveraging a talented, diverse workforce from underestimated backgrounds to create digital equity worldwide.”
It should not be confused with the similarly-named firm Bitwise Asset Management, based in San Francisco, which provides digital asset-based index funds, and at least two other IT consulting companies named simply “Bitwise.”
The criminal charges against former CEOs Jake Soberal and Irma Olguin, Jr. coincide with the SEC’s civil case, for which an investigation is still ongoing. If convicted, the pair face a maximum $250,000 fine and 20 years in prison, and they have also agreed to a ban on either of them serving as officers or directors of public companies.
Soberal and Olguin allegedly produced fake financial documents to convince potential investors the company was healthy and growing. In fact, the company had always struggled to raise sufficient investments and had been on the verge of collapse when the fraudulent activities were reported to have commenced in January 2022.
Monique C. Winkler, Regional Director of the SEC’s San Francisco Regional Office, said: “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. 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.”
Bitwise’s collapse and its impact on the Fresno community
Bitwise’s collapse eventually happened in May 2023 when the company failed to make payroll, and the scheme was uncovered, putting 900 employees out of work effective immediately.
Defense lawyers said Soberal and Olguin accepted full responsibility for “the mistakes they made while trying to preserve Bitwise.” These “grave and consequential errors,” they claimed, came from a “sincere desire not to see Bitwise fail.”
Prosecutor U.S. Attorney Phillip A. Talbert took a harsher view, saying: “The defendants could have chosen simply to admit the failure of Bitwise’s business model. Instead, they used lie after lie to pull over $100 million into a dying venture through fraud.”
Internal Revenue Service (IRS) Criminal Investigation Acting Special Agent in Charge Mark Silva also took a dim view of the “mistakes” defense, referring to the impact of the company’s implosion on 900 families in the Fresno, California, area where the company was based.
“These sorts of white-collar crimes often root from greed and mismanagement and leave hard-working tax-paying citizens damaged in their wake. Let me say this to any would-be fraudulent business owners in pursuit of ill-gotten proceeds: The talented and motivated special agents from IRS Criminal Investigation and our law enforcement partners from the FBI will catch you.”
Prosecutors said that in January 2022, Soberal and Olguin made an agreement to lie about the company’s financial situation and real estate holdings to Bitwise’s board of directors, investors, lenders, and others. Documents forged included financial information in board presentations, investor materials, bank statements, and audits.
The co-CEOs used the money they subsequently raised to pay staff (including their own $600,000 a year salaries), get rid of debts from previous lenders, and fit out Bitwise’s offices.
Watch: Callahan, MaGruder, Lee, and Reinhardt: Probing criminal acts
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