Bitwise founders plead guilty to $115 million fraud scheme

Date: July 17, 2024

Contact:[email protected]

Fresno, CA - Irma Olguin, Jr. and Jake Soberal, the founders and leaders of the failed Fresno-based start-up company, Bitwise Industries ("Bitwise"), pleaded guilty today to one count of conspiring to commit wire fraud and one count of wire fraud, United States Attorney Phillip A. Talbert announced. They admitted to defrauding investors, lenders, and others out of $115,000,000.

According to court records, Olguin, Jr. and Soberal founded Bitwise in 2013. The company then grew to have three business lines: (1) technology workforce training program, (2) technology consulting service, and (3) a real estate arm that bought, renovated, and leased commercial properties. The company promised to create jobs for underserved groups of people, revitalize blighted urban areas, and show that such a project could be highly profitable.

By early 2022, Bitwise had raised over $75,000,000 through Series A and B investment rounds, and the company had grown to 800 employees and apprentices across multiple offices and states. But the company was not making a significant profit and was running low on funds.

Thereafter, Olguin, Jr. and Soberal conspired to mislead investors, lenders, and others into believing that Bitwise was excelling when it was instead failing. They fabricated financial information in investor materials and altered and forged other financial records to inflate the company's revenues, cash balances, and other financial markers.

The following are illustrative examples of Olguin, Jr. and Soberal's fraud:

• In a February 2022 presentation and July 2022 prospectus that were circulated to investors, Olguin, Jr. and Soberal represented that Bitwise's cash balance was over $44,000,000 as of the end of 2021. They also represented that the company's revenue was more than $58,000,000. In reality, the company's cash balance was less than $12,000,000 at that time and its revenue was minimal;
• In June and July 2022, Olguin, Jr. and Soberal falsely represented to a California-based investment firm that Bitwise had secured a $150,000,000 investment from another, London-based investment firm. This was done to convince the California-based investment firm to purchase several buildings that Bitwise owned. Several months later, Soberal falsely represented to another lender that Bitwise still owned those buildings to get the lender to loan Bitwise millions more dollars;
• In a March 2023 presentation circulated to investors, Olguin, Jr. and Soberal represented that Bitwise's cash balance was over $77,000,000 as of the end of 2022. They also represented that the company's revenue was more than $143,000,000. In reality, the company's cash balance was less than $5,000,000 at that time and its revenue was again minimal;
• Also in March 2023, Olguin, Jr. and Soberal provided an investor with an altered version of an audit of Bitwise that was previously conducted by an international audit firm. They altered the audit to make it appear as though Bitwise's revenue was 300 percent higher than was true;
• Also in March 2023, Soberal represented to a long-time Bitwise employee that the company had sufficient resources on-hand to induce the employee to make a significant loan to the company.

This pattern continued until the end of May 2023 when Bitwise ran out of money and the company collapsed.

As a result of Olguin, Jr. and Soberal's false and fraudulent representations, Bitwise received $115,000,000 in investments and loans to which the company was not entitled. The ill-gotten money went towards paying the company's payroll, outfitting its office spaces, and repaying debts owed to prior investors and lenders, among other business expenses.

Olguin, Jr. and Soberal admitted that they used their positions as Bitwise's co-Chief Executive Officers to conceal their fraud from the company's board of directors and others at the company. They also admitted to using sophisticated means to deceive and cheat investors and lenders out of their money.

This case is the product of an investigation by the IRS Criminal Investigation (IRS CI) and the Federal Bureau of Investigation. Assistant United States Attorneys Joseph Barton and Henry Carbajal III are prosecuting the case.

Olguin, Jr. and Soberal are scheduled to be sentenced on November 6, 2024. They face maximum statutory penalties of 20 years in prison and a $250,000 fine for each of the conspiracy to commit wire fraud and wire fraud counts. That makes for a total maximum penalty of 40 years in prison and a $500,000 fine. They also agreed to pay full restitution. The actual sentences, however, will be determined at the discretion of the court after consideration of any applicable statutory factors and the Federal Sentencing Guidelines, which take into account a number of variables.

CI is the criminal investigative arm of the IRS, responsible for conducting financial crime investigations, including tax fraud, narcotics trafficking, money-laundering, public corruption, healthcare fraud, identity theft and more. CI special agents are the only federal law enforcement agents with investigative jurisdiction over violations of the Internal Revenue Code, obtaining a more than a 90 percent federal conviction rate. The agency has 20 field offices located across the U.S. and 12 attaché posts abroad.

Public link

Please use the above public link if you want to share this noodl on another website.