A new lawsuit filed Wednesday seeks $33 million from Bitwise Industries for a failed business venture.
This is the latest negative financial news for the Fresno-based tech/real estate company, which furloughed its staff of about 900 employees on Monday.
Filed by Texas-based NICbyte LLC, the lawsuit alleges that Bitwise and several of its subsidiaries “concealed from Plaintiff their intentional breaches of the joint venture agreement and self-dealing to the tune of tens of millions of dollars, in violation of their duties under the joint venture agreement, wherein — among others — Defendants encumbered the assets of the joint venture with unauthorized loans accruing to their personal benefit.”
The lawsuit cites media reports of Bitwise’s trouble and asks the Fresno County Superior Court for swift action.
“Defendants cannot be trusted,” the lawsuit said.
The lawsuit is suing Bitwise Industries, Inc., and nine other companies associated with Bitwise. The suit in Fresno County Superior Court lists five causes of action, including breach of contract.
Additionally, NICbyte is asking a judge to prevent the Bitwise companies from any other financial dealings. NICbyte also seeks to freeze assets and wants Bitwise to turn over its financial records.
Real Estate Venture Gone Wrong
The 24-page complaint accuses Bitwise and its companies of securing loans on real estate, when it did not have the authority.
NICbyte entered into a venture with Bitwise subsidiary Wishon Row, LLC, to buy five properties in California. NICbyte would contribute 95% to the joint venture agreement.
The properties included the State Center Warehouse at 747 R Street in downtown Fresno, purchased for $21 million. NICbyte said it put up the majority of the money to make the purchase.
Bitwise bought the building in July 2022 to settle another lawsuit from business partners of the company’s co-CEO, Jake Soberal. When GV Wire asked Soberal about the origin of the $21 million, he replied “the bank” and would not elaborate.
The Bitwise companies took out “several unauthorized loans allegedly and invalidly secured by the … properties,” according to the lawsuit. They also listed four properties for sale, all without the permission of NICbyte, the lawsuit alleges.
Through “flagrant deception and unauthorized actions,” the loans mounted to $30 million, according to NICbyte.
“(Wishon Row’s) actions have put Investor at risk of losing nearly its entire investment amount in the Company, which totals approximately $35.5 million,” the lawsuit says.
“NICbyte/Investor does not have any knowledge as to where the loan proceeds have gone, whether (Wishon Row) still possesses them, or if they even still exist,” the lawsuit continues.
The lawsuit states the Bitwise companies failed to pay NICbyte its share of any quarterly distributions under the joint agreement.
No court date has been set.