The former Co-CEOs of Bitwise Industries Inc., a private technology services startup based in Fresno, California, have been charged by the Securities and Exchange Commission (SEC) for falsifying financial documents while raising approximately $70 million from investors in 2022.

The allegations against Jake Soberal and Irma Olguin, Jr. expose a scheme of deception that ultimately led to the downfall of the company. The Former Co-CEOs are accused of making material misrepresentations and fabricating financial documents to mislead investors regarding Bitwise's financial health.

Bitwise's Alleged Deception Unraveled

The documents included falsified bank records and a counterfeit audit report, both of which allegedly portrayed Bitwise as a thriving business with healthy financial performance. In reality, Bitwise was grappling with cash shortages and struggling to maintain its operations.

Monique Winkler, the Regional Director of the SEC’s San Francisco Regional Office, mentioned: “We allege that Soberal and Olguin resorted to blatant fraud, including the creation of fake financial documents, to deceive investors and raise money."

"In one instance, the defendants allegedly conspired to send a purported screenshot to investors of a company bank account showing a cash balance of $23.4 million. In actuality, the account had only $325,100 in it. That’s not a bank error — that’s a fraud, and the SEC is taking action to hold the defendants accountable."

Today we announced charges against Jake Soberal and Irma Olguin, Jr., the former co-CEOs of Fresno, California-based private technology services startup Bitwise Industries Inc., for misleading investors about the company’s finances.

— U.S. Securities and Exchange Commission (@SECGov) November 9, 2023

According to the SEC, the consequences of the scheme became evident in May 2023 when Bitwise was unable to meet its payroll obligations and was forced to terminate its entire workforce of 900 employees in May.

According to the regulator’s statement, Soberal and Olguin have reached an agreement with the SEC, subject to court approval. In a separate legal action, the US Attorney's Office for the Eastern District of California has also filed criminal charges against Soberal and Olguin for alleged fraudulent activities.

The Journey from Grace to Grass

The unraveling of Bitwise left many questions unanswered. What led to the company's sudden demise? It becomes evident that the issues ran deeper than a simple economic downturn, differentiating Bitwise's situation from the numerous tech companies that have faced layoffs during challenging times, the Los Angeles Times reported.

The company's downfall was accompanied by peculiar financial management decisions. Payroll transitioned from direct deposit to paper checks, leading to confusion and anxiety among employees. Paychecks began bouncing, and 401(k) contributions went missing.

The situation continued to deteriorate as the landlord moved to evict Bitwise from its properties in Fresno due to unpaid rent. Despite the mounting crisis, Olguin and Soberal remained silent. Meanwhile, former employees launched a class-action lawsuit against Bitwise, alleging violations of labor laws and wage theft.