Ex Bitwise CEOs charged in $100 million fraud scheme
FRESNO, Calif. (WTVG) - The U.S. Department of Justice announced Thursday it has charged the former CEOs of a tech start up that was supposed to open a Toledo location earlier this year in a $100 million fraud scheme.
Bitwise Industries founders Irma Olguin Jr, a University of Toledo graduate, and Jake Soberal are charged with conspiring to commit wire fraud. Investigators allege they took more than $100 million from various businesses and individuals. They each face 20 years in prison and a $250,000 fine.
Bitwise, a company that aimed to train people to work in tech, was slated to open a Toledo campus at the former Jefferson Center earlier this year until it laid off its workforce and the company collapsed. 13 Action News reported in June Bitwise was behind on paying taxes and late on rent payments at some of its other properties. Bitwise was expected to create nearly 378 full-time jobs in Ohio, generating $20.4 million in new annual payroll, according to estimates from Gov. DeWine’s office.
The statement released Thursday from the DOJ said Bitwise failed despite its recent reports the company was worth over $500 million and was financially sound. The criminal complaint alleges Olguin and Soberal agreed to lie about the company’s financial state to get investments, loans, and other funding. The two allegedly fabricated financial information in board presentations and investor materials, and forged or changed financial records to inflate the company’s revenues, cash balances, and property holdings.
Prosecutors allege that money went toward Olguin and Soberal’s salaries, paying company payroll and fringe benefits, outfitting company office spaces, and repaying debts.
The charging documents allege that the co-founders repeatedly made personal short-term loans to the company and paid themselves significant fees for those loans. In one instance, the SEC alleges Olguin loaned Bitwise $220,000. The next day Bitwise wired her $247,000, giving her proceeds of $27,000.
“The defendants could have chosen simply to admit the failure of Bitwise’s business model. Instead, they used lie after lie to pull over $100 million into a dying venture through fraud,” U.S. Attorney Talbert said in a statement. “Olguin, Jr. and Soberal fabricated bank statements, lied to investors, provided false financial information to their board of directors, forged documents, and used buildings Bitwise no longer even owned as collateral for loans, all while lining their own pockets.
An IRS Criminal Investigation Special Agent said the Olguin and Soberal’s alleged actions impacted over 900 families.
“These sorts of white-collar crimes often root from greed and mismanagement and leave hard working tax paying citizens damaged in their wake,” said IRS Criminal Investigation Acting Special Agent in Charge Mark Silva in a statement. “Let me say this to any would be fraudulent business owners in pursuit of ill-gotten proceeds: The talented and motivated special agents from IRS Criminal Investigation and our law enforcement partners from the FBI will catch you.”
Olguin and Soberal made their initial court appearances Thursday and are due back in February of 2024, court records show.
A statement from the Securities and Exchange Commission Thursday said the agency also charged Olguin and Soberal, and that the two agreed to resolve the charges against them. The SEC filed a complaint in a parallel action for violating antifraud provisions of federal securities laws. The SEC said Olguin and Soberal to entering a partial judgment.
“We allege that Soberal and Olguin resorted to blatant fraud, including the creation of fake financial documents, to deceive investors and raise money,” said Monique C. Winkler, Regional Director of the SEC’s San Francisco Regional Office in a statement. “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 fraud, and the SEC is taking action to hold the defendants accountable.”
Both agencies said investigations are ongoing.
The future of the newly-renovated Jefferson Center in Toledo is in limbo, but earlier this summer Promedica said it will work with community stakeholders to figure out the best use for the building and find an owner.
Federal authorities listed dozens of creditors across the country as possible victims of this alleged fraud scheme. The listed creditors include a local non-profit, Connecting Kids to Meals.
The organization’s president, Wendi Huntley provided a statement Thursday night.
Connecting Kids To Mals contracted with Bitwise to have customized software created to help create a more effecient process for gathering data in relation to our meal programs for kids. It is unfortunate to see how this situation has unfolded with their bankruptcy filing and now the latest allegations of fraud by their executive leaders. The excitement around all that Bitwise promised to do has now turned into extreme disappointment for many in our community. Our focus is and will continue to be on increasing access to healthy meals for kids in our area as we continue to move forward.
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