In a move anticipated since the financial collapse of the company, Fresno-based Bitwise Industries has filed for bankruptcy.

The Wednesday filing in a Delaware federal court seeks Chapter 7 bankruptcy protection for several Bitwise corporations — BW Industries Inc.; Bitwise Industries, Inc.; BWRD, LLC; Alpha Works Technologies, LLC; and Bruce’s Bagels, Beverages and Bites, LLC.

“The Companies do not have sufficient capital to maintain operations and the impact of the foregoing on such Company’s businesses,” the petition said.

The company lists $253 million in assets, most coming from its main company Bitwise Industries ($212 million).

906 Ventures, LLC, a Denver-based company, is listed as its top creditor at $10 million “plus unliquidated amounts.” The bankruptcy filing also lists 906 Ventures with a $15.5 million claim.

The filing lists accounts in six different banks, all with relatively small balances — none more than $223,000. However, there is an “unknown” balance at Central Valley Community Bank, and a negative balance ($2,700) at First Republic Bank.

On Wednesday, GV Wire reported that federal and state investigators are probing Bitwise’s financial collapse.

Bitwise’s Collapse

The goal of Bitwise, celebrating its 10th year, was to provide high-tech opportunities to underserved communities. Founded by locals Jake Soberal and Irma Olguin Jr., the company established a foothold in downtown Fresno. And, with $157 million raised in the last four years from investors, it rapidly expanded coast-to-coast with several offices in “underdog” cities.

GV Wire first reported the financial cracks in May, when Bitwise failed to pay its Fresno County property taxes. Its Fresno landlord also accused the company of being delinquent in $500,000 in rent. Employees complained that checks were bouncing.

In his final on-camera video, Soberal denied any issues, prophetically answering about the financial issues of his company “I hope it’s good.”

Several employees also have accused Bitwise of taking out money for 401(k) and health insurance payments, but never depositing the money in the appropriate accounts.

The city of Fresno said a Bitwise entity never paid its business taxes, up to $21,000. Earlier this month, the Fresno City Council canceled a $1 million contract with Bitwise to help small businesses with technological upgrades. The city has paid out $500,000 thus far.

Bitwise, or its affiliated companies, has six active lawsuits because of its business practices, plus a labor action in Pennsylvania, and a demand letter for restitution pending from Amendola Investments. The latter has a $3.6 million claim.

Reaction: Just a Speed Bump

Bitwise reportedly owed $500,000 in missed rent to its landlord, Baltara Enterprises LP. The final figure may be more.

“We’re not surprised that they filed bankruptcy. It didn’t appear that they had adequate assets to survive their cash shortage, period. We had held off on filing a lawsuit with the expectation that they would file (bankruptcy). So we’ll have to pursue reclaiming funds and the creditors claim in the federal court,” Baltara president Will Dyck said.

Dyck evicted Bitwise from his three buildings — South Stadium, Bitwise Hive, and Bitwise Hive — earlier this month.

Roger Bonakdar is a Fresno attorney representing several former Bitwise employees in a lawsuit filed in Fresno County Superior Court.

“We expected that Bitwise would resort to a bankruptcy filing to try and jam up their various creditors and slow down the inevitable picking apart of whatever is left of their assets. It’s not going to shield them ultimately, though, from these claims,” Bonakdar said.

Bonakdar said the bankruptcy filing will add several months to the lawsuit. He has to make a filing in federal court.

“At most, it’s a speed bump. We’ll get through it and over it,” Bonakdar said.

Dyck is realistic about his chances of recouping what he is owed.

“I would hope that we’re able to collect something from the assets that Bitwise has remaining, but I think there’s a very low probability that we’ll get made whole,” Dyck said.

About the Filing

The 31-page bankruptcy filing estimates the company has $100 million to $500 million in assets, and the same range in liabilities. There are between 100 and 199 estimated creditors.

Some of the assets include a 2021 Audi, nine leased buildings in Fresno, Bakersfield, and Chicago; several insurance policies or annuities, among other financial holdings.

Interim president Ollen Douglass signed the document. He was joined by only two others listed as members of the board of directors — Oakland venture capitalist Mitchell Kapor, and San Francisco venture capitalist Paula Pretlow.

Kapor is listed as owning an 8.2% interest in the company.

The petition lists nearly 500 entities it owes money to — a combination of businesses and individuals — but does not list the specific amount each is owed.

More specific documents include several employees it owes “reimbursement,” including co-CEOs Soberal ($53,217) and Olguin ($33,496). The listing also includes other property taxes owed and money owed to vendors.

The document lists 698 different payments owed.

A meeting of creditors is scheduled for Aug. 3, in the Wilmington, Delaware federal building.

The U.S. Courts described Chapter 7 bankruptcy on its website:

“A Chapter 7 bankruptcy case does not involve the filing of a plan of repayment as in Chapter 13. Instead, the bankruptcy trustee gathers and sells the debtor’s nonexempt assets and uses the proceeds of such assets to pay holders of claims (creditors) in accordance with the provisions of the Bankruptcy Code. Part of the debtor’s property may be subject to liens and mortgages that pledge the property to other creditors. In addition, the Bankruptcy Code will allow the debtor to keep certain “exempt” property; but a trustee will liquidate the debtor’s remaining assets. Accordingly, potential debtors should realize that the filing of a petition under Chapter 7 may result in the loss of property.”

Wilmington, Delaware-based law firm Chipman Brown Cicero & Cole, LLP is listed as the bankruptcy attorney for Bitwise. It lists a retainer of $100,000 agreed to on June 9.

Read the Main Bankruptcy Filing