A video of then-Bitwise Industries co-CEO Jake Soberal hinting at committing crimes and deceiving investors may have been the last straw for his company’s board of directors.
In a legal filing this week related to Bitwise’s bankruptcy petition, board member and investor Mitchell Kapor detailed his version of events that sank the Fresno-based tech and real estate company.
Officially, Kapor (pronounced CAY-per) and fellow board member Paula Pretlow are asking the bankruptcy judge to keep proceedings in Delaware.
A motion, made on behalf of several Fresno-area creditors, seeks to move the proceedings to Fresno. A hearing is scheduled for Wednesday, Aug. 23, in Wilmington, Delaware.
For years, Kapor said in the legal filing, Soberal painted a rosy financial picture of Bitwise. But, things were not what they appeared.
Shortly after GV Wire first published reports in May of the financial troubles Bitwise was in, the board fired co-CEOs Soberal and Irma Olguin Jr.
“As we now know, Mr. Soberal’s representations, and others on which Mr. Kapor and the Board relied, turned out to be false,” the legal filing said.
Sources have previously told GV Wire that Bitwise and Soberal are under FBI investigation.
The total lost investment, Kapor said in legal filings, is $30 million for him, his wife, and his companies.
Soberal: ‘I Don’t Want the Investor to Know … We Really Messed Up’
As late as May of this year, Soberal assured the board of directors that things were fine. The company, he said, had $77 million cash on hand.
The perception of Bitwise’s financial viability changed during Memorial Day weekend, when Soberal contacted Kapor “to confess that the company was in dire financial straits and could not meet its obligations to its employees.”
This happened days after GV Wire’s first stories about Bitwise were published.
Kapor and his wife and business partner, Freada Kapor Klein, also received an anonymous email showing a video that “appears to be a recording of company management joking about committing crimes and deceiving investors.”
GV Wire has obtained excerpts of that video, which depicts Soberal allegedly saying during a Jan. 5, 2023, management meeting:
“But like, I mean, and a lot of the stuff we do, it’s like, hey, I don’t want the investor to know that we’re like, we really messed up in this one way. So like, can we think of a way not to tell them? And (name deleted) is like, ‘Oh yeah, I’ve got three ways.’ And so I just really appreciate that.”
The board had enough and fired Soberal and Olguin on June 6. But it was too late to save the company. Bitwise later filed for bankruptcy.
Soberal didn’t return GV Wire’s request for a comment on the video before the publication of this story.
A Cash Shortfall
Kapor first met Soberal and Olguin in 2018. Believing in Bitwise’s mission to invest in “ignored” communities like Fresno, Kapor and Klein — through their venture capital firm Kapor Capital — helped the company with its first round of venture capital funding.
By October 2020, the Bitwise board consisted of Soberal, Olguin, Kapor, Pretlow (known for her venture capital connections), Joseph Proietti, a venture capitalist and Merced native, and Ollen Douglass with Motley Fool Ventures.
The financial reports and future outlook remained positive. An independent firm valued the company stock at $250 million. Its Series B-2 investments raised $80 million (publicly announced on Feb. 2023).
At the November 2022 board meeting, Soberal told the board there was an unexpectedly urgent need for short-term cash, due to action by one of its real estate partners and what he claimed were minimum cash covenants from Citibank and Goldman Sachs.
Through several subsequent lawsuits, Soberal claimed that the investment banks required Bitwise to keep a minimum in the bank in the tens of millions. Goldman Sachs later said this was false, that it never had a minimum mandate.
Kapor and Klein loaned Bitwise $4.5 million to help with the cash flow gap.
“The company’s misrepresentations, misleading statements, and material omissions to the Board continued in 2023. As we also now know, the financials presented to the Board were falsified, and management forged directors’ signatures on documents used to take out loans that were hidden from the Board,” the legal filing said.
Soberal continued to tell the board that “real estate expenses could not be addressed by its cash on hand.”
As late as March 2023, Soberal told the board that Bitwise has $77 million cash on hand. And, during a meeting in May 2023 at the Kapors’ home, neither Soberal nor Olguin let on about any financial troubles, the legal filing stated.