A new lawsuit from a Bitwise Industries lender alleges the company’s business plan was a Ponzi scheme with the intent to defraud investors. It now wants its money back and more in damages.
Filed by the Chowchilla-based business Agri Capital, the Fresno County Superior Court lawsuit alleges Bitwise “was nothing more than a classic Ponzi scheme rooted in the fraud deceit which its top officers, with Board of Director endorsements, solicited money by crafting a false narrative of financial fortune and stability to lure in unsuspecting investors who believed the company’s mission.”
The lawsuit alleges that then co-CEO Jake Soberal solicited a bridge loan from Agri Capital CFO Jim Maxwell in April.
Maxwell agreed to a $1 million loan based on financial documents provided by Bitwise. The loan would be backed by Bitwise shares owned by Soberal and co-CEO Irma Olguin Jr.
Another $500,000 loan through an Agri Capital company would be secured by the stocks owned by Bitwise president Bethany Mily.
Both loans included extra fees.
Read the lawsuit at this link. Certain email addresses, phone numbers and signatures have been redacted.
Several Claims Made to Bolster Bitwise’s Viability
Soberal made several claims, including that the company needed to keep $65 million in the bank because of an agreement with investor Goldman Sachs, the lawsuit alleges.
A source with knowledge of the Goldman Sachs arrangement said there was no such covenant or requirement.
The lawsuit states Bitwise verified it had $65 million in one of its accounts. Soberal reached out to Maxwell on May 29 — the same day Bitwise furloughed its reported 900-member work force — saying “Bitwise had fallen upon hard times” and the money was “mostly gone.”
The money, Soberal told Maxwell, was used to repay other investors.
The lawsuit alleges 11 counts, including fraud and breach of contract. It is seeking a return of its $1.6 million investment, and $5 million in additional damages.
This is the sixth known active lawsuit against Bitwise for its business practices.
SJV Sun first reported on the Agri Capital lawsuit.
Messages left for Soberal, Olguin, and Mily were not returned.
Bitwise in Fresno Court Tuesday
A Mountain View-based attorney appeared on Bitwise’s behalf at a Tuesday afternoon court hearing.
Lael Andara represented the company in a lawsuit brought by a business partner of Bitwise affiliated companies. NICbyte LLC alleges that Wishon Row LLC breached its contract by taking a $30 million loan on seven properties in Fresno, Bakersfield, and Oakland.
NICbyte, a Houston-Texas firm affiliated with San Francisco venture capitalists, partnered with Wishon Row to purchase the building in 2022 for $21 million. NICbyte is working to dissolve the relationship and take sole possession of the building.
Court documents showed that Bitwise borrowed money from StarTop Investments LLC ($25 million), Patrick Investments LLC ($5.5 million), and TOWA LLC and AHBH LLC ($2 million). Although those figures total $32.5 million, in the finance world, the “encumbered” amount does not always match the loan amount.
Bitwise was in the process of moving to State Center Warehouse (747 R St. in downtown Fresno) as its new headquarters before furloughing 900 employees on May 29. Bitwise officially fired its employees Wednesday.
At the hearing Tuesday in the chambers of Judge Jeffrey Hamilton, NICbyte asked for prior copies of its lawsuit to be amended to allow the redaction of bank account numbers — erroneously displayed in the lawsuit. Hamilton granted the request.
Hamilton previously issued a temporary restraining order, freezing some of the company’s bank accounts, and ordering Wishon Row/Bitwise to turn over records. NICbyte attorney Steve Sutro said they have not received any records so far.
The TRO was set to expire Saturday. Hamilton said it will now continue until a hearing on June 21.
Andara works for the law firm Dickinson Wright, with offices around the country. Other legal documents indicate Venroy July, an attorney with the firm’s Washington, D.C., office, is also representing Bitwise.