Eight former Bitwise Industries employees have sued, alleging that the financially distressed company violated state law and failed to pay wages and maintain records.
Represented by attorneys Roger Bonakdar and Brian Whelan, the employees’ positions range from security guard to business analyst.
Although the company says that it furloughed its reported 900 employees nationwide on May 29, the lawsuit considers the employees terminated. There are nine counts in the lawsuit.
The lawsuit names several corporate entities under which Bitwise operates and several associated limited liability companies.
Former co-CEOs Jake Soberal and Irma Olguin Jr. are listed as defendants.
More plaintiffs could join the suit, Bonakdar told GV Wire on Wednesday.
Bitwise Knew it Issued Bad Checks: Lawsuit
The 24-page lawsuit, filed in Fresno County Superior Court on Wednesday, alleged that Bitwise issued checks “with full knowledge that the checks would be dishonored or otherwise ‘bounce.’ ”
This caused “a wave of losses and life interruptions” including bank penalties.
The lawsuit also accuses Bitwise of wage theft for not paying employees.
CEOs Claim Bitwise Solvent: Lawsuit Allegation
The lawsuit references alleged statements made by Soberal and Olguin under oath that Bitwise had $81 million in available funds in its Central Valley Community Bank account as of March 9, 2023.
“This information and representation was material to Lenders to induce Lenders to provide this loan. Lenders would not have entered into any loan agreement with Borrower but for this information,” the lawsuit alleges.
However, the lawsuit does not indicate where the statement came from.
Soberal allegedly told investors privately that “Bitwise is done” and “(the board) have been meeting twice a day to manage the situation,” according to the lawsuit.
The lawsuit alleges Bitwise purposely mislabeled the employment action as a furlough “to both mislead the public and the Bitwise employees.”
Insight on the Bitwise Board
Also revealed for the first time are members of the Bitwise board — also listed as defendants: Mitchell Kapor, Paula Pretlow, Ollen Douglass, and Joseph Proietti.
Last Friday, Douglass sent an email to employees announcing the board fired Soberal and Olguin; and that Douglass would now serve as Bitwise’s interim president. The lawsuit said the board met on or around May 28 in Oakland.
A self-described “social impact venture capitalist,” Kapor is a founding partner with Kapor Capital. Kapor recently co-authored “Closing the Equity Gap” with his wife, Freada Kapor Klein. The book is about how to ethically invest in companies. Kapor was an early investor in Uber, of which he and his wife have since become highly critical.
Long-time San Francisco resident Pretlow has served on several independent boards, including the audit committees for culinary retailer Williams Sonoma and online car dealer Vroom. Pretlow was a senior vice president for the investment firm The Capital Group.
Douglass has been a member of the Bitwise independent board going back to January 2021. He is also the founding board member of The Motley Fool Foundation, which focuses on providing financial guidance to people.
Proietti has been on the board of DISH Network Corp. since October 2019. On Tuesday, Dish Network fell off the S&P 500, reassigned to the S&P SmallCap 600 beginning June 20.
Class Action Lawsuit
The lawsuit claims Bitwise also broke the state WARN Act, which requires 60 days’ notice when layoffs occur. The company is required to provide notice to affected employees, the state, and in this case, the city of Fresno. No party received the warning.
The act also requires the company to provide COBRA benefits — a way of retaining a level of health insurance for 60 days.
The litigation was filed as a class action, a legal action representing a group of people with similar claims, Bonakdar said.
“One of the important differences (between a class action and regular lawsuit) is the judge’s active role in protecting the class with active oversight on certification of the group deemed to have been harmed and both potential settlements and resolutions,” Bonakdar said.
A judge will decide whether to certify the case as a class action case.
The nine counts in the lawsuit: violation of the state WARN Act; unfair business practices; failure to pay wages; wage theft; failure to maintain accurate records; failure to furnish wage statements; failure to timely pay wages; failure to pay minimum wages; and negligence.
No court date has been set. The lawsuit filing does not ask for a specific amount of damages.
(GV Wire’s Edward Smith contributed to this report.)
Read the Lawsuit Complaint