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Bitwise
Fresno Bank Sued. It Allegedly Helped Bitwise Commit Fraud.
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By David Taub, Senior Reporter
Published 1 month ago on
March 18, 2024

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Central Valley Community Bank faces a lawsuit related to Bitwise’s financial meltdown.

Former Bitwise business partner accuses the bank of covering up fraud.

NICbyte claims damages exceeding $50 million.


A former business partner of Bitwise Industries sued the bankrupt company’s bank, claiming it helped aid the fraud that eventually led to federal criminal charges.

Now one of Fresno’s most well-known businesses, Central Valley Community Bank, faces a civil lawsuit.

Filed last November in San Francisco, NICbyte said CVCB’s action “enabled Bitwise Industries, Inc. … to perpetuate massive fraud.”

While NICbyte’s allegations are spelled out in its lawsuit, the bank wasn’t talking on Monday.

“Thank you for your inquiry, we have no comment at this time,” a bank spokesperson told GV Wire.

Bitwise, the Fresno real estate and technology company, filed for bankruptcy in June 2023, a spectacular fall for a company with high hopes. A reported 900 employees were laid off nationwide.

Former CEOs Jake Soberal and Irma Olguin Jr. face federal fraud charges — allegedly defrauding investors and the company’s board of directors, and doctoring bank records. They each face one count each of conspiracy to commit wire fraud. Both pleaded not guilty last year.

Soberal and Olguin return to court in Fresno for a preliminary hearing on April 4. However, there is a request to delay the hearing until May 16, primarily to allow the defense to review one million pages of evidence.

The NICbyte Deal

NICbyte, a Texas-based company connected to San Francisco venture capitalists New Island Capital Management LLC, entered into a 2022 deal with Bitwise to develop several properties in California.

The lawsuit, among other things, alleges that the bank failed to protect NICbyte’s money and turned a blind eye to Bitwise’s fraud.

“The Bank’s violations and self-serving scheme to conceal its violations were uncovered by Plaintiffs only when they were granted access to the electronic communications of the two former co-CEOs of BW Industries,” the CVCB lawsuit said.

An attorney for NICbyte did not respond to messages for comment.

Former Bitwise co-CEOs Jake Soberal, left, and Irma Olguin Jr., center, appear in federal court, Nov. 10, 2023 (GV Wire/Jahz Tello).

Fraud Alleged

As part of its real estate deal, NICbyte, in its lawsuit, said it entered into a July 2022 agreement with Bitwise to keep $6 million on hand in the bank, known as a deposit account control agreement. DACA is a special yet complicated account to help mitigate a bank’s risk between a borrower (Bitwise) and a non-bank lender (NICbyte).

The account, NICbyte claims, could only be terminated by mutual agreement. Soberal requested to cancel the account in November 2022. The plaintiff said the bank never told them.

Not only did NICbyte claim to lose $6-plus million that was supposed to be in the DACA account, but it suffered “as much as $50+ million in damages. Soberal’s/BW Industries’ fraudulent scheme—as to Plaintiffs—could have been avoided altogether if CVCB had been honest, dealt fairly and in good faith, and complied with its promises in the DACAs.”

The lawsuit goes on to allege that “CVCB obscured their role in the fraud on Plaintiffs (masquerading as ‘client service’). Despite obvious wrong-doing and the loss of millions of dollars due to Plaintiffs, the Bank hid behind inflated ‘confidentiality’ concerns to obstruct Plaintiffs’ investigation into how exactly $6+ million dollars in which Plaintiffs held a security interest disappeared from the Deposit Account.”

The lawsuit said the bank was motivated to keep Bitwise happy as a customer.

CVCB’s CEO James Kim “purposely mislead” NICbyte, saying no one else could claim the money. The lawsuit alleged “this was a lie,” with another lender — Venture Lending & Leasing IX, Inc. — having an interest in the DACA account.

If NICbyte had known that fact, it would “never would have proceeded with its business dealings with Soberal, BW Industries, its affiliates, or its bank, CVCB,” the lawsuit said.

The lawsuit also claimed the bank did nothing to prevent Soberal from committing fraud against another company, 1861 Acquisitions, LLC — a New York state company that had a tax-credit agreement with Bitwise. Soberal allegedly altered a screenshot showing a forged balance with CVCB.

“It did nothing to alert the community at large (or Plaintiffs) as to Soberal’s fraud,” the lawsuit said. CVCB shut down its relationship with Bitwise after the bank’s attorneys communicated with 1861 Acquisitions.

In its legal responses, the bank said the account was properly terminated.

NICbyte also has an active lawsuit against Bitwise over the failed business venture.

Organizational chart showing the relationship between NICbyte and Bitwise. (NICbyte vs. CVCB lawsuit)

Deal Gone Bad

In 2022, BW Industries Inc., the corporate parent of Bitwise — through its Wishon Row, LLC subsidiary, formed an investment partnership with NICbyte for five properties in Fresno, Oakland, and Bakersfield.

The partnership created several limited liability companies, including one for each property. The combined company was known as NIC Wise. The split would be 95% to 5% in favor of NICbyte. The Bitwise subsidiary would manage the day-to-day operations, and Bitwise would use the properties for its offices. It planned to move into the refurbished State Center Warehouse building at 747 R Street in Fresno and use it as its headquarters.

Bitwise would lease the buildings, keeping at least 18 months of rent in the DACA. The DACA account could only be closed with both parties’ consent. The bank was supposed to provide five days’ notice if one side wanted to close the account.

NICByte alleged “that Soberal and his fellow former co-CEO Irma Olguin Jr., through Wishon Row and BW Industries, were merely using the joint venture as an opportunity to defraud NICbyte out of its entire investment.”

Bitwise allegedly sent NICbyte bank statements about the validity of the account. Soberal then solicited loans from investors, using the joint venture as collateral.

NICbyte discovered the fraud in October 2023 after reviewing bankruptcy documents.

Case Returning to Fresno

While the case was filed in San Francisco Superior Court, Judge Charles Haines granted CVCB’s motion last month to move the case to Fresno County Superior Court. Haines also awarded CVCB $17,100 in attorney’s fees.

NICbyte is represented by San Francisco-based Duane Morris LLP. The Sacramento-based Buchalter law firm represents CVCB.

 

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David Taub,
Senior Reporter
Curiosity drives David Taub. The award-winning journalist might be shy, but feels mighty with a recorder in his hand. He doesn't see it his job to "hold public officials accountable," but does see it to provide readers (and voters) the information needed to make intelligent choices. Taub has been honored with several writing awards from the California News Publishers Association. He's just happy to have his stories read. Joining GV Wire in 2016, Taub covers politics, government and elections, mainly in the Fresno/Clovis area. He also writes columns about local eateries (Appetite for Fresno), pro wrestling (Off the Bottom Rope), and media (Media Man). Prior to joining the online news source, Taub worked as a radio producer for KMJ and PowerTalk 96.7 in Fresno. He also worked as an assignment editor for KCOY-TV in Santa Maria, California, and KSEE-TV in Fresno. He has also worked behind the scenes for several sports broadcasts, including the NCAA basketball tournament, and the Super Bowl. When not spending time with his family, Taub loves to officially score Fresno Grizzlies games. Growing up in the San Francisco Bay Area, Taub is a die-hard Giants and 49ers fan. He graduated from the University of Michigan with dual degrees in communications and political science. Go Blue! You can contact David at 559-492-4037 or at Send an Email

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