Fresno Startup Faces Federal Complaint After Abrupt Shutdown
Federal authorities have brought charges against the co-founders of Fresno startup Bitwise Industries, Irma Olguin Jr. and Jake Soberal, for fraud. The charges come months after the company laid off all of its employees and shut down without explanation.
Accusations of Wire Fraud and Misappropriation of Funds
The co-founders surrendered to authorities on Thursday after being accused of conspiring to commit wire fraud and misappropriating over $100 million. U.S. Attorney for the Eastern District of California, Phillip A. Talbert, announced the charges in a news release, stating that “they used lie after lie to pull over $100 million into a dying venture through fraud.”
Former Tech Darling of Central Valley
Bitwise had been hailed as the tech darling of the Central Valley, with promises to transform the region’s economy and empower workers with digital skills. However, on Memorial Day, the company furloughed all 900 employees and later informed them that their jobs were permanently eliminated. Bitwise filed for bankruptcy in June and has since faced lawsuits from former board members, lenders, and ex-employees.
Allegations of Deception and Fabrication
According to the federal complaint, Olguin and Soberal began deceiving board members, investors, and lenders as early as January 2022 to secure additional funding. They allegedly fabricated information in presentations and investor materials, as well as forged various records. The money obtained was used to meet payroll, renovate office spaces, and repay previous debts.
Potential Penalties
If found guilty, Olguin and Soberal could each face a maximum sentence of 20 years in prison and a $250,000 fine.
SEC Charges and Allegations of Misleading Investors
The U.S. Securities and Exchange Commission (SEC) also announced charges against the former co-chief executives for allegedly falsifying records and misleading investors to raise $70 million. Monique C. Winkler, regional director of the SEC’s San Francisco office, stated that the co-founders “resorted to blatant fraud, including the creation of fake financial documents, to deceive investors and raise money.” One such instance involved sending investors a screenshot of a company bank account, falsely showing a balance of $23.4 million when it only had $325,100.
Accountability and Legal Consequences
The SEC is taking action to hold the defendants accountable for their actions, emphasizing that the alleged actions go beyond simple mistakes and constitute fraud. The legal proceedings against Olguin and Soberal will continue in federal court in Fresno.