Bitwise & Betrayal: Inside the Fraud Scandal That Shook Fresno

Episode 3: Behind the Bitwise Meltdown: Truth and Consequences
Hosts: Tim Sheehan and Robert Rodriguez
Release Date: December 18, 2024

Introduction

The third episode of the Bitwise podcast, titled "Behind the Bitwise Meltdown: Truth and Consequences," delves deep into the unraveling of Bitwise Industries, a once-promising technology community initiative in Fresno. Over a decade of growth ended abruptly in 2023 with the company's collapse, leaving employees unpaid, investors defrauded, and founders facing federal fraud charges. Hosts Tim Sheehan and Robert Rodriguez, alongside expert guests, unpack the intricacies of the scandal, its impact on the community, and the ongoing legal repercussions.

The Rise and Vision of Bitwise Industries

Bitwise Industries was founded in 2013 by Jake Soberall and Irma Olgwyn Jr., who envisioned transforming downtown Fresno by developing a robust technology community. The company aimed to provide training opportunities in the tech industry for underserved populations and revitalize blighted buildings through technological hubs.

• Tim Sheehan emphasized the company's inclusive ethos: "Bitwise is a place where every person... we are an ecosystem." [00:24-01:17]
• Bob Rodriguez highlighted the founders' commitment to accessibility in tech: "You have to have a place you can point to and say, this is where you come. That's why we started Bitwise." [01:17-01:45]

Over the years, Bitwise expanded its vision to other Californian cities with plans to extend nationally.

The Collapse of Bitwise Industries

Starting in 2022, discrepancies between Bitwise's promises and its financial reality became apparent. On May 23, 2023, the company suddenly furloughed all employees and closed its operations nationwide without warning.

• Monique Winkler, Regional Director of the SEC, explained the fraud allegations: "They conspired to commit wire fraud, lying to board members, investors, lenders, and others about Bitwise's financial condition." [00:24-02:13]
• Jen Guerra, a Bitwise employee, recounted the lack of transparency: "Why weren't you just real with Ash?... we have no control, there's just chaos." [02:13-05:56]

The SEC filed charges alleging that founders Soberall and Olgwyn Jr. swindled over $100 million from various stakeholders by falsifying financial statements and misleading investors.

Impact on Employees and the Community

The sudden shutdown had devastating effects on employees, many of whom faced financial ruin, including evictions and frozen bank accounts. The use of paper checks and failure to remit taxes exacerbated these issues.

• Roger Benachter, a Fresno attorney, detailed the financial strain on employees: "Most people can't afford to miss half a paycheck... they are in the red and their bank account's frozen." [06:20-08:32]
• Jen Guerra expressed feelings of betrayal and confusion: "I started Googling it... there's just a black hole." [02:41-05:56]

Class action lawsuits emerged, with employees suing Bitwise leaders over unpaid wages and benefits.

Legal Proceedings and Plea Deal

In July 2024, founders Jake Soberall and Irma Olgwyn Jr. reached a plea agreement with prosecutors, agreeing to plead guilty to wire fraud and conspiracy to commit wire fraud. They face significant fines, potential prison time, and restitution payments totaling up to $115 million.

• Bob Rodriguez noted the upcoming court appearance: "They are going to have to stand up, face the district court judge, and admit guilt." [15:34-15:50]
• Tim Sheehan reflected on the plea deal's implications: "I think atonement is a good thing... I would have wanted to see that in the plea agreement." [17:35-20:29]

Both founders issued an apology, acknowledging their deceit and the resulting hardships faced by employees and investors.

Sentencing and Aftermath

On December 17, 2024, Judge John Kohen sentenced Soberall to 11 years in prison and Olgwyn Jr. to nine years, alongside hefty restitution orders. The sentencing, while significant, is just one facet of the ongoing fallout.

• Jake Soberall issued a heartfelt apology: "We are deeply sorry... for the money that you entrusted to us that you may never get back." [15:06-17:31]
• Roger Benachter critiqued the legal focus on financial fraud over employee harm: "It's a letdown... I feel for the employee that couldn't buy diapers and formula." [17:35-20:29]

Civil lawsuits from investors and lenders continue, and a $20 million settlement awaits hundreds of former employees.

Rebuilding and Community Trust

Despite the scandal, efforts to rebuild and restore community trust are underway. Will Dyke, a developer who had previously renovated Bitwise properties, took proactive steps to stabilize and re-lease the affected buildings.

• Will Dyke shared his approach to regaining tenant trust: "We just have to do a one-page legal paperwork... And that's what we did." [22:53-24:24]
• Monique Winkler highlighted the challenges faced by new initiatives: "The truth was enveloped in a thick fog of deceit." [10:26-10:40]

New tenants like Qwiklabs are thriving, signaling hope for sustainable growth without the ethical pitfalls that led to Bitwise's downfall.

Conclusion

The Bitwise scandal serves as a cautionary tale about the fragility of trust in entrepreneurial ventures. As legal proceedings continue and the community grapples with the aftermath, the episode underscores the profound personal and financial toll of corporate fraud. The efforts to rebuild emphasize resilience and the importance of maintaining ethical standards to foster genuine community growth.

Notable Quotes with Attribution and Timestamps

• Monique Winkler (SEC): "They conspired to commit wire fraud, lying to board members, investors, lenders, and others about Bitwise's financial condition." [00:24-02:13]

• Jen Guerra (Employee): "Why weren't you just real with Ash?... there's just a black hole." [02:13-05:56]

• Roger Benachter (Attorney): "Most people can't afford to miss half a paycheck... they are in the red and their bank account's frozen." [06:20-08:32]

• Will Dyke (Developer and Landlord): "We just have to do a one-page legal paperwork... And that's what we did." [22:53-24:24]

• Jake Soberall (Founder): "We are deeply sorry... for the money that you entrusted to us that you may never get back." [15:06-17:31]

• Tim Sheehan (Host): "I think atonement is a good thing... I would have wanted to see that in the plea agreement." [17:35-20:29]

Final Thoughts

The Bitwise podcast episode meticulously chronicles the rise and catastrophic fall of Bitwise Industries, highlighting the human cost of corporate deceit. Through firsthand accounts and expert insights, it paints a comprehensive picture of the scandal's impact on Fresno's tech community and beyond. As the legal battles continue and the community seeks healing, the episode serves as a sobering reminder of the importance of integrity in business.

Listen to the full episode on Apple Podcasts, Spotify, YouTube Music, or your preferred podcast platform.