Dozens of attorneys involved in the Bitwise Industries bankruptcy and subsequent lawsuits meet in New York starting Tuesday for mediation hearings.
Attorneys tell GV Wire that the goal is to figure out how much money Bitwise has left, and who will get paid. The bankruptcy paused most of the civil suits. The results of the meetings, known as a global mediation, could resume some aspects of the litigation.
The two-day meeting will serve as a settlement conference between bankruptcy officials, creditors, and those suing Bitwise or its leadership.
Bitwise, the Fresno-based tech and real estate company, filed for bankruptcy last June, after GV Wire broke the story of major financial problems within the company. Nearly 900 employees nationwide lost their jobs.
A criminal investigation ensued, leading to fraud charges against the company’s former co-CEOs — Jake Soberal and Irma Olguin Jr. They are scheduled to next be in Fresno federal court on April 4.
Bitwise’s financial troubles and questionable real estate and fundraising deals led to several lawsuits from former employees, business partners, and lenders.
What Attorneys Are Looking For
Jeoffrey Burtch, the court-appointed trustee in charge of Bitwise’s assets since the bankruptcy, is expected to attend the global mediation.
Attorneys representing Bitwise’s remaining board of directors are also scheduled to attend. However, board members Paula Pretlow and Mitch Kapor have one set of attorneys while board members Ollen Douglas and Joseph Proietti have another set. Some of the civil lawsuits are trying to hold the board personally responsible for losses.
“There will be back and forth trying to resolve all the claims that are being made against Bitwise by secured creditors, the employees and otherwise,” said Fresno attorney Roger Bonakdar, who represents employees in a class action lawsuit.
Bonakdar’s case, Garza v. BW Industries, is paused in Fresno County Superior Court until the mediation conference.
“This will be a pretty complex process. It’s involving more than a dozen law firms. And, obviously, several dozen claimants apart from the hundreds that we represent in the class action,” Bonakdar said.
At least 30 attorneys, including Bonakdar and other Fresno attorneys, are scheduled to attend.
An unknown that could be resolved in the New York meetings is how much Bitwise has left in assets, and who gets first claim. Secured creditors — those owed money because Bitwise pledged actual property or other assets against those claims — are typically at the front of the line. Unsecured creditors and former employees would follow.
‘We’re Coming and We’re not Letting Go,’ Says Bonakdar
Jack Raisner is a New York City-based attorney representing another set of disaffected employees, with a lawsuit (Nunn, et. al. v. Bitwise Industries Inc.) pending in federal court filed in Fresno.
“Who gets the money is an unknown at this point. The mediation, if it’s successful, would, create something of an orderly distribution of what funds there are or may be. If it’s not successful, then it may take years (to discover how many assets Bitwise has), Raisner said.
Bonakdar said, “Everyone is going to be vying for what is left.
“This is not going to be an easy road, nor will it be a short journey. I anticipate that at a minimum, we will make some progress and, have a better understanding of the assets and things that we can reach. And, further, I think we’re going to be able to really impress upon the directors that there’s no way out for you yet. We’re coming for you, and we’re not letting go.”
Insurance Policy Dispute
Board members claimed that they too were duped by Soberal and Olguin, who painted a rosy yet false picture of Bitwise’s financial health. There is also ongoing litigation between Douglas and Proietti and Soberal and Olguin, about who should benefit from a $5 million insurance policy from Scottsdale Insurance Company covering litigation.
“Our view is that we’re not limited by the insurance, we’re not limited by these other things. And, we should have priority after these secured creditors, at a minimum against Bitwise as assets and then direct liability for the directors,” Bonakdar said.
Raisner provided a cautious answer on whether mediation will provide relief for his clients.
“It’s wait and see. I can’t tell you what the odds are,” Raisner said.