Tech startup Bitwise founders charged in $100 million financial fraud scheme

The Securities and Exchange Commission (SEC) is pursuing charges against the former co-CEOs of the failed private technology services startup Bitwise Industries. Jake Soberal and Irma Olguin, Jr. allegedly falsified documents while raising $70 million from investors.

Bitwise Industries, a Fresno, California-based private technology services startup, misled investors by overstating the company’s finances. SEC alleges that Soberal and Olguin made material misrepresentations, falsifying documents concerning cash position and historical performance.

“We allege that Soberal and Olguin resorted to blatant fraud, including the creation of fake financial documents, to deceive investors and raise money,” said Monique C. Winkler, Regional Director of the SEC’s San Francisco Regional Office.

In one instance, the defendants allegedly sent a purported screenshot of a company bank account to investors. It showed a cash balance of $23.4 million, when in reality, the account was 72 times smaller. It 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,” Winkler said.

According to court records, Bitwise abruptly collapsed earlier this year despite recent reports the company was worth over $500,000,000 and was financially sound. While founders and leaders knew that Bitwise faced constant cash shortages and was on the brink of failure, they continued to paint Bitwise as a healthy, growing business.

In May 2023, Bitwise failed to make payroll, and all of the company’s approximately 900 employees and apprentices were later laid off abruptly, including the company’s board of directors who fired Olguin and Soberal.

In a parallel action, the US Attorney’s Office for the Eastern District of California (USAO) announced criminal charges against former co-CEOs. The federal complaint charges them with conspiring to commit wire fraud and taking more than $100,000,000 from various businesses and individuals.

United States Attorney Phillip A. Talbert said that Olguin and Soberal self-surrendered on Thursday.

“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,” US Attorney Talbert said. “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.”

IRS Criminal Investigation Acting Special Agent in Charge Mark Silva of the Oakland Field Office evaluated that over 900 families from the Fresno and Bakersfield communities were hit directly by the fraud.

“These sorts of white-collar crimes often root from greed and mismanagement and leave hard working tax paying citizens damaged in their wake,” Silva said.

The lies continued at least since January 2022. Much of the money obtained from investment, loans, and other funding went towards paying Bitwise’s payroll and fringe benefits, Olguin, Jr. and Soberal’s $600,000 per year salaries, outfitting the company’s office spaces, and repaying debts owed to prior lenders, according to the US Attorney's Office.

If convicted, Olguin, Jr., and Soberal each face a maximum statutory penalty of 20 years in prison and a $250,000 fine. Soberal and Olguin have each agreed to the entry of a partial judgment, subject to court approval, imposing permanent and conduct-based injunctions.

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