One of the biggest questions in the Bitwise collapse is how a company that claimed to have raised $157 million from investors couldn’t make payroll or pay a variety of taxes before it furloughed its entire workforce.
Three insiders who formerly worked for the Fresno-headquartered company told GV Wire that Bitwise has long been plagued by problems.
These problems included questionable financial moves, lack of documentation to proceed with arranged real-estate deals, favoritism in the workplace, and nepotism.
The overall picture, these insiders say, was a business that grew quickly without any of the supporting infrastructure or controls in place to succeed.
All three former employees spoke to GV Wire on the record but not for attribution. All said they didn’t want their names used out of fear of reprisal.
GV Wire reached out to interim Bitwise president Ollen Douglass, but did not receive a response.
Soberal Told People What They Wanted to Hear
One of the ex-employees worked for Bitwise in the mid-2010s as the company was starting up and then left for another job.
“I saw a lot of the grime, and I just had to get out of there,” said the person, who described a close working relationship with Bitwise’s co-CEOs and founders, Jake Soberal and Irma Olguin Jr.
“Jake was definitely the mouthpiece and the brainiac behind getting all the funding. And the one who figured out what they needed to say to the public to get things done. And then Irma was the one that seemed like she cared more about people and getting people in the right jobs,” the source said.
The insider likened Soberal to a politician or “The Wizard of Oz.”
“He is telling people what they want to hear to get where he needs to go. Bitwise, I think, started with good ideas and good intentions, but they got in over their head and decided to do things in a nefarious manner. There’s no way you can do that and last.
“I feel really bad for all the employees that got left in the shuffle who are now looking for work. There are so many of them. That’s really where my heart goes out to them.”
Watch: GV Wire’s David Taub Interviews Bitwise co-CEO Jake Soberal
Deals Fell Apart Because Bitwise Lacked Financial Documents
A second former Bitwise employee worked in the company’s finance department, helping arrange real estate loans.
“I would ask for the documentation that I needed to get the funding arranged. I would work with the funders themselves. They would request more due diligence documents. And that’s where the deals fell apart,” the former employee said.
The frustration with not receiving the proper financial documents motivated the employee to leave.
“Without those documents in hand. I could not legitimately raise any commercial real estate capital for them. It was going to be impossible. And so I just wrote a resignation letter,” the source said.
Bitwise Finally Found Financing for a Key Project. Now the Lender Is Suing.
The former employee said he tried 30 lenders for the State Center Warehouse project in downtown Fresno. Banks were a “non-starter” because Bitwise wasn’t willing to supply vital documents, including audited tax returns.
“Tax returns were always the big no-no. So that was like, we don’t have them. We’re a startup. We’re in the middle of the process of filing,” the former employee said.
Maybe that excuse would work for the first few years of a start-up, the former employee said, but not in Year 8.
Eventually, Bitwise found a partner with NICbyte LLC, a Houston-based company with ties to San Francisco venture capitalists. The former employee did not know why NICbyte would lend the money when others said no.
Last week, NICbyte sued Bitwise and its entities, claiming a breach of contract.
The same source said that “when it came to financial returns, values of the property … (Soberal) would kind of just make things up on the spot.”
A representative of NICbyte did not respond to GV Wire’s request for comment.
Soberal, Olguin Fired After Bitwise’s Collapse
Last Friday, the Bitwise board of directors fired Soberal and Olguin. This came after a two-week period of payroll problems, lawsuits from business partners, and the revelation that the company failed to pay local property and business taxes. On Monday, documents obtained from the state of Delaware — where parent company BW Industries Inc. is incorporated — indicated that Bitwise was $77,759 behind on its corporate taxes there.
“The thing that gets me was Bitwise kept saying they’re all about the humans, but they’ve left 900 people without jobs. They aren’t paying taxes. They’re taking taxpayer money. Like what? What is that? How is that about humans?” said the insider who worked closely with the company’s founders.
The Financial Hustle Started on Day One
Struggling to make payroll was a problem back in the mid-2010s, as it was in recent years.
“They were always worried about payroll not coming through. It was always a stressful time. They were hoping that people wouldn’t always cash their checks. So it sounds very similar to what’s going on now,” the source said.
Soberal handled most of the business side. He had meetings every day. It was about creating buzz, the insider said.
“Whenever they (got) into a tough spot, they’d call one of their connections and get a new investment. And I don’t know how or if they ever got paid back, but I know it was like a constant flow of, oh shoot, we’re behind and now we need to call somebody else to get some cash. Like it was always a problem like that.”
Soberal himself admitted in a recorded video with GV Wire a week before the furloughs that he was always seeking large equity investors, as well as trying to arrange short-term loans throughout the life of the company.
The same insider also questioned Bitwise’s spending decisions.
“We were running events that were very, very expensive. We were buying office furniture that was very expensive. We had designers coming in to renovate buildings. They were sparing no expense, trying to get this place to look the coolest and be the coolest. Meanwhile, we were worried about making payroll, so that never made sense to me at all.”
A third source told GV Wire that Bitwise was a seat-of-the-pants operation — unlike anything the source had seen while working previously for other Fresno companies. This third source was part of the company-wide furlough announced on Monday, May 29.
“There were no approval processes in place or budgets for social events, recruitment, or procuring things like supplies and equipment,” the source said.
The same source also said that Bitwise withheld employee contributions for healthcare insurance while failing to pay the company premiums for the insurance. The source confirmed that employee 401(k) contributions were taken from paychecks without being deposited into the employees’ 401(k) accounts.
“There was nowhere to make a complaint,” said a different former employee. “They didn’t even have an H.R. department. If you wanted to complain, it would be directly to the people that you were complaining about.”
Bitwise has since hired an HR department.
Watch: Irma L. Olguin Jr.: How to Turn Around a City
Who You Know, Not What You Know
Bitwise’s culture, an insider said, depended on connections. It was a place where the cool kids advanced and others were held back.
“If you knew somebody or were in with somebody, you had a much better chance of getting a promotion, even if you weren’t in the company. There were a ton of people who didn’t have the same connections as people outside of the company, and they would get passed over for people that were either relatives or in romantic relationships. And then everyone who was waiting for promotions would be kind of upset that they got passed over for somebody, you know, a cousin, nephew, niece, etcetera. There was a lot of that going on at that time, too,” said the source who worked closely with Soberal and Olguin.
Bitwise’s website listing leadership and executives show that Sandi Olguin — described as Irma Olguin’s sister — worked there. She is listed as the chief real estate officer.
Santana Olguin, senior vice president of building services, is believed to be Irma’s brother. Santana’s wife also works at Bitwise according to her Facebook profile; as well as an Olguin aunt.
“(Irma) just really wanted to help people and probably her family also were some of the people that she wanted to help,” the same source of Olguin.
When reached on the phone, Santana Olguin had no comment. Messages were left for Irma Olguin and Sandi Olguin, with no response.
“If you were one of the chosen ones, you would get to the top of the hierarchy very quickly,” the source said. “And if you weren’t, you would get all of the work and none of the perks, essentially. I think people liked staying there because it was growing and it was cool and there were fun events and it was kind of like the talk of the city … they could use that to keep you there without having to give you much.”
Meanwhile, the company’s huge staff of executives was handsomely compensated, the source said.
“The people who are like me didn’t last long. And the people who drank the Kool-Aid lasted forever. I’m shocked now, looking at all the (social media) posts from employees and things of that nature. Because they’re all still very pro-Bitwise and they’ve just been left completely high and dry. It’s like they’ve been brainwashed.”