Former Bitwise Industries CEOs Jake Soberal and Irma Olguin Jr. lied, schemed, and otherwise defrauded the Bitwise Board of Directors, accusations in new legal documents allege.
“It is clear that the CEO Defendants were concealing material information and actively misleading investors, lenders, employees, and partners, as well as their own Board, for years,” states a legal filing with the U.S. Bankruptcy Court in Delaware.
Bitwise filed for bankruptcy on June 28, capping a month in which a company — operating as a beacon of tech in underdog towns — collapsed, causing hundreds of employees to lose their jobs.
In a motion filed with the bankruptcy court, former board members Joseph Proietti and Ollen Douglass are seeking the right to file a lawsuit against Soberal, Olguin, and an insurance company.
Because of the bankruptcy, all legal actions pending against Bitwise were paused. Commencing new legal action must be approved by the court.
CEOs ‘Deliberately Misrepresented’ Finances: Claim
The legal document offers insight into the board of directors’ perspective.
The board members alleged that their CEOs “deliberately misrepresented the financial condition” of the company. The board fired Soberal and Olguin on June 2, days after Bitwise furloughed (and later laid off) more than 600 employees.
Soberal and Olguin engaged in several financial transactions, the motion alleges — such as taking out millions in loans — without the knowledge of the board. That included taking out a $5 million insurance policy on the company with Scottsdale Insurance Co. The policy started on April 30, 2023, less than a month before Bitwise collapsed.
Proietti and Douglass are asking that the insurance company cover them against lawsuits filed against Bitwise and not cover the former CEOs. Scottsdale rejected a claim to defend Bitwise against a lawsuit by several former employees.
Messages to Soberal, Olguin, and their attorneys were not returned.
The End of Bitwise
The motion alleges that Soberal and Olguin “had been engaged in the concealment of material information and the active and intentional misleading of investors, lenders, employees, partners, and the members of the Bitwise Board of Directors, along with the general public, for a lengthy period of time.”
The former CEOs also are accused of falsifying documents, even to the board.
The beginning of the end came during Memorial Day weekend, when Soberal and Olguin met with the board, with an emergency — Bitwise did not have enough money to cover recently issued paychecks. However, the company had $77 million in receivables coming in — a lie, the legal papers allege.
Proietti, a Merced native and husband of Walton family (of Walmart fame) heir Alice Proietti, had been an investor in the company since 2019. He lent the company an undisclosed amount “knowing it would likely never be returned,” the legal filing said.
His private equity firm, 906 Ventures, LLC, is the biggest creditor of Bitwise. Bankruptcy filings show 906 Ventures is owed $10 million from a previous loan, made based on Soberal’s “falsely rosy financial picture” of the company, according to the filing.
Douglass, a Maryland-based financial professional, was named interim president of the company after Soberal’s and Olguin’s dismissal.
Proietti and Douglass called themselves “innocent victims of the schemes perpetrated by the CEO Defendants.” The two other board members — Paula Pretlow of San Francisco, and Mitchell Kapor of Oakland — are not named as plaintiffs in the potential legal action.
Harsh Accusations Against Former CEOs
The legal filing repeatedly accused Soberal and Olguin of falsifying records and outright lying.
“CEO Defendants paid themselves lavish salaries and perks such as company cars. At the same time, of course, the CEO Defendants misrepresented the financial condition and profitability of Bitwise not only to the general public, but also to its insurers, its employees, its own Board of Directors (the “Board”), its lenders, and its investors,” the filing said.
The motion also includes a proposed lawsuit to be filed in Fresno County Superior Court, if approved by the federal bankruptcy court. It does not hold back against Soberal and Olguin.
“In an attempt to enrich themselves and avoid responsibility for their unethical, self-dealing actions for as long as possible, the CEO Defendants told lie after lie to cover up previous lies,” the motion said.
The filing said the actions of the former CEOs caused “millions upon millions” in losses for investors.
In one lawsuit against Bitwise filed by Agri Capital, it is alleged that Soberal solicited bridge loans from Central Valley businesspeople. He claimed the company needed money because millions were tied up under a contract with investment firm Goldman Sachs.
A source with knowledge of the Goldman Sachs deal told GV Wire that there were never any requirements to hold onto cash.
The board members said in the legal filings they had no knowledge of Soberal’s solicitations.
Sources have told GV Wire in the past that federal investigators have requested financial data from the city of Fresno while investigating possible fraud involving Bitwise.
The filing also accused Soberal of “wildly false and misleading” financial reports he presented to the board. That includes $143 million in revenue for 2022, with $16 million net income. Soberal allegedly claimed those figures would increase for 2023.