File: Bitwise South Stadium in Fresno, California, is permanently shut down to former workers of the company. Bitwise declared insolvency in June.
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This week, federal authorities accused two top figures of a Fresno-based technology firm of misleading investors to support their ailing company, resulting in losses worth millions of dollars.
The criminal complaint filed by the United States Attorney’s Office for the Eastern District of California on Wednesday against Irma Olguin Jr. and Jake Sobral, co-founders of tech company Bitwise, also included an affidavit from FBI Agent Chet Johnston, outlining the results of a joint probe by the FBI and IRS Criminal Investigation Team. Johnston stated that, during interviews, Olguín and Sobral confessed to fabricating financial records and deceiving investors, acknowledging “significant wrongdoing.”
The U.S. Attorney’s Office released a statement on Thursday concerning the wire fraud conspiracy charge, nearly six months following Bitwise’s abrupt collapse, which left its 900 employees jobless and led to the company’s bankruptcy.
In accordance with the Fresno Bee, both former executives, terminated by Bitwise’s board in early June, entered a not guilty plea in a Fresno courthouse on Thursday. If convicted, Olguín and Sobral could face a maximum of 20 years in prison and a $250,000 fine.
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Olguin and Sobral established Bitwise together in 2013, and the company ultimately merged three divisions: workforce training, software consulting, and real estate management. According to Johnson’s affidavit, Olguín and Sobral secured $20 million for the company from investors in December 2019, $48 million in December 2021. and $38 million during an investment round in 2022. As per the complaint, a majority of the funds were utilized to repay previous debts, cover payroll — including $600,000 salaries for Olguín and Sobral each — and outfit office spaces. Eventually, Bitwise declared bankruptcy in June 2023.
“The defendants could have simply chosen to acknowledge the failure of Bitwise’s business model,” U.S. Attorney Philip Talbert remarked in a Thursday press release. “Instead, they used lie after lie to fraudulently raise over $100 million from a failing enterprise.”
Johnson’s affidavit refers to interviews with unnamed former employees – some of whom purportedly received promotions to higher-paying roles without the requisite experience – and alleges that company executives attempted to deceive investors by utilizing fake bank statements and falsely representing revenues.
At one juncture, Olguin and Sobral provided an investor with an “altered” bank statement displaying a Bitwise account dated March 31, 2022, with over $20 million in cash, per the affidavit. The affidavit discloses that First Republic Bank furnished authentic statements to the authorities, revealing that the company only possessed $325,000. The affidavit articulates that Olguín and Sobral “explained that they made the changes because they believed … that no one would invest in the Series B-2 if people knew the true condition of the company.”
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Legal representatives for the former executives did not promptly respond to SFGate’s queries for a statement. Additionally, as reported by the Fresno Bee, during the court session on Thursday, an attorney handed Olguin a civil lawsuit on behalf of former Bitwise employees and informed, “You have been served.”
Have you heard about something occurring at a California technology company? Contact tech journalist Stephen Council securely at [email protected] or on Signal at 628-204-5452.
Source: www.bing.com
