Former Bitwise Industries co-CEO Jake Soberal and Irma Olguin Jr. return to federal court Friday for a review hearing of their bond. They are each charged with one count of conspiracy to commit wire fraud. Both pleaded not guilty at their joint Nov. 9 arraignment.

If convicted, Soberal and Olguin both face a maximum of 20 years in prison and $250,000 fine.

Emotions were raw during their first court appearance as the pair walked into the courthouse. Judge Sheila Oberto granted each conditional bond, which included putting their respective homes up as collateral.

Several former Bitwise employees were present and waited for the pair to emerge from the courtroom after the hearing. One former employee yelled at Soberal and Olguin, requiring a court security officer to intervene.

The 42-page  complaint, filed by federal prosecutors Joe Barton and Henry Carbajal, detailed the alleged deception Soberal and Olguin engaged in, which forced Bitwise to declare bankruptcy in June 2023 and fire a reported 900 employees.

Soberal and Olguin are scheduled to appear in front of Magistrate Judge Barbara McAuliffe on Friday at 2 p.m.

Inside the Complaint

Written by FBI Special Agent Chet Johnston, the complaint detailed the alleged criminal activities of Soberal and Olguin. The investigation included reviewing “hundreds of thousands of pages” and interviews with “dozens of people” including the suspects, in September 2023.

Several times in the complaint, the government said Soberal and Olguin admitted to wrongdoing.

“Olguin, Jr. and Soberal have admitted that, beginning no later than January 2022, they conspired with each other to lie to board members, investors, lenders, and others about Bitwise’s finances to obtain investment money and loans. They did so by fabricating financial information in board presentations and investor materials, as well as altering and forging bank statements, board consents, and other financial records to inflate the company’s revenues, cash balances, and property holdings. They also misled the board members, investors, lenders, and others into believing Bitwise was excelling when it was instead failing,” the complaint said.

Soberal and Olguin said they were the only ones involved in the criminal scheme “and that they limited other employees’ access to information to conceal their scheme to defraud.”

The government said Soberal and Olguin were earning approximately $600,000 when the company collapsed. Much of the money the pair “obtained by fraud” went to paying employee salaries, outfitting company office space, and repaying incurred debts, according to the document.

Misleading Investors

The complaint said the pair “became desperate” when a $150 million potential investment fell through in 2022. Representatives of the investor, listed as a London-based private equity firm, pulled out after Soberal and Olguin refused to provide Bitwise’s bank statements showing a cash balance.

Soberal and Olguin allegedly told the investor they did not want to move forward because the investor “did not align with the company’s stated goals and culture of inclusiveness” and requests for due diligence were “unfair.”

The government also said that Soberal and Olguin provided other investors altered bank account statements, vastly overstating cash balances by tens of millions of dollars.

“Olguin, Jr. and Soberal later admitted in their government interviews that they agreed to alter the bank statements and inflate Bitwise’s cash balances. They explained that they made the alterations because they believed the due diligence memorandum would be unfavorable and no one would invest in the Series B-2 if people knew the company’s actual condition,” the complaint said.

The complaint says the misrepresentations led to Bitwise receiving $38 million during that round of investments. It lists several investors who said they would not have given money if not for the inflated numbers.

The government says Soberal and Olguin admitted to altering documents, because of “confusion” over accounting practices. The complaint said that excuse is “contradicted” by other evidence — that they knew the differences, but did so anyway to suit them.

The complaint also mentioned Bitwise selling tax credits, to “Company One,” fitting the description of 1861 Acquisitions, a New York-based company. Bitwise pocketed the money, but never paid back its business partner, prosecutors say.

GV Wire was able to match actual names of individuals and companies to aliases used in the complaint through research, publicly available documents, and sources.

Prosecutors say when 1861 Acquisitions asked where its money was, Soberal pleaded ignorance. The company sued, eventually settling out of court.

The complaint stated that Soberal and Olguin “obtained fraudulent loans from various companies to pay back COMPANY ONE.” Again, Soberal used altered bank documents to secure the loan from another investor.

As the company was collapsing, the complaint said, Soberal and Olguin reached out to several investors for help, netting $4.5 million. The representations made to the investors ” were false, and Olguin, Jr. and Soberal admitted to misleading these people in their government interviews. The government has not found any evidence that these loans have been repaid.”

Investor Sues Over Bitwise Actions

Despite not receiving the $150 million investment, Soberal and Olguin told another investor, listed as Joint Venture Partner One, that it was still happening. The partner matches the description of NICbyte, a real estate company with ties to San Francisco venture capital firms.

The partner purchased several Bitwise buildings, including 747 R Street in Fresno — where Bitwise was preparing to move its headquarters — $35 million for 95% ownership. The agreement was for Bitwise to lease the buildings back from NICbyte and sublease to other tenants.

When the investor began to question Bitwise’s financial viability, the company sent altered bank statements inflating its cash holdings.

While attending a Bitwise board meeting in March 2023, the investor’s representative wondered why he could not get financial records when Soberal told the board of a $77 million cash balance.

“He could not understand why Soberal was refusing to provide the requested financial records to JOINT VENTURE PARTNER ONE when Bitwise was purportedly doing so well. He figured that Soberal would want to tout Bitwise’s success,” the complaint said.

The business partner told the government it “would not have gone through” with the joint venture with accurate financial information.

NICbyte is currently engaged in a lawsuit with Bitwise subsidy companies over the failed venture. Bitwise, or its affiliates, face a total of nine civil lawsuits, plus a bankruptcy filing.

The Fresno City Council is scheduled on Thursday to consider leasing the building from NICbyte.

Bitwise Finance Team Questions Company

By 2022, the company seemed like it was in full swing, achieving the goal of a tech company in underdog cities, starting with Fresno. Soberal and Olguin presented to the board that revenues were $58 million, with $44 million cash balance. A March 2023 presentation to the board inflated those figures to $143 million in revenue and a $77 million cash reserve.

“The revenue was fabricated according to the company’s former Chief Financial Officers (‘CFO’) and other key finance personnel,” the complaint said.

The government said that Bitwise had less than $1.5 million left in the bank by June 1, 2023.

The company’s president, identified as “Employee One” in the complaint and fitting the description of Beth Mily, told the government “the company was constantly running low on cash and could barely keep up with its approximate $5,000,000 per month in payroll expenses.”

When Mily mentioned the cash flow problems to Soberal and Olguin, “they told her not to worry.”

Soberal and Olguin would make personal loans to the company, with a 10% interest rate. Other employees were asked to do the same, calling it “passing the hat.”

The company’s former CFO, fitting the description of Mike Rodriguez, told the government Bitwise lost over $20 million a year and that the company did not use the Generally Accepted Accounting Principles method, a business standard.

The battle over what accounting practice to use caused the CFO “a great deal of stress” leading to his leaving the company. The company took 14 months to hire its next CFO, with several people telling the government that was “by design.”

“CFO Two,” fitting the description of Caryn Nightengale who worked from January to May 2023, told the government she had reservations about the company financials provided by Soberal and Olguin.

Other former Bitwise financial employees said the company’s sales and revenues “were always low” and “not close to being profitable.”

An accountant, listed as “Employee Five” told the government that other managers and financial employees “were either incompetent or acting with malice but that he did not know which one it was.”

Soberal also bought a Tesla in the waning months of the company, purchased with company funds, the government said.

Hiring Practices Questioned

Toward the end, Bitwise had a payroll of up to $6 million a month. It issued paper checks instead of direct deposit — with the goal of not having all its employees collect money at once.

Olguin, the complaint said, sent a company-wide email when the checks began to bounce “saying that it was because Bitwise had so much money the banks could not keep up.”

“Employee Three,” the company’s former controller fitting the description of Kelly Taylor, said Soberal and Olguin “seemed to hire a lot of friends, family members, and acquaintances who were not qualified for their jobs, paid everyone high salaries, and gave people large raises despite the company’s financial struggles.”

Employee Five also complained about nepotism “rampant at the company.”

It is believed that two Olguin siblings and her aunt worked at the company.

“Employee Six,” fitting the description of Brittany Stevens, was hired as an executive assistant and quickly promoted to VP of Hiring, making $125,000 a year.

“This was despite her not having any professional work experience let alone experience hiring people. EMPLOYEE SIX further explained that there were no rules at Bitwise for how many people she hired and that she even received approval to hire multiple people the week before the company collapsed,” the complaint said.

“Employee Seven,” fitting the description of Channelle Charest, had a background as a tattoo artist before being promoted to COO, then chief growth officer, making $300,000 a year. In a footnote in the complaint, a witness said Charest would “lie to the government for Olguin.”

Messages to Charest from GV Wire seeking comment were not returned.

Early Investors Concerned

The company raised $20 million in startup Series A funding in December 2019. A Series B fundraising effort in December 2021 raised $48 million.

“Investor One (described in the complaint as ‘a pioneer in the tech industry’) said that the Series A money was supposed to help Bitwise expand into Bakersfield, Merced, and other cities in California. He explained, however, that most of the money went towards buying out some of the company’s early investors and that there was only a few million in Series A funds left over,” the complaint said.

John Dodson was one of Bitwise’s first partners, and fits the description as the tech pioneer.

Another investor, fitting the description of real estate developer and eventual Bitwise landlord Will Dyck, told the government “the company never had a business model and that it was all just a bunch of hype.”

Read the Criminal Complaint