SEC Charges Former Co-CEOs of Bitwise Industries for Falsifying Documents in $70 Million Fundraising Scheme

The Securities and Exchange Commission (SEC) has filed charges against Jake Soberal and Irma Olguin, Jr., former co-CEOs of Bitwise Industries Inc., a private technology services startup based in Fresno, California. The charges stem from allegations that the executives misled investors about the company's financial health while raising approximately $70 million in 2022. Soberal and Olguin have agreed to settle the charges brought against them.

The SEC's complaint asserts that Soberal and Olguin engaged in deceptive practices by making material misrepresentations and falsifying documents related to Bitwise's cash position and historical financial performance during the fundraising campaign. The executives allegedly provided investors with fabricated bank records and a counterfeit audit report, showing inflated cash balances and higher revenues than Bitwise had actually generated. These misrepresentations portrayed Bitwise as a robust, growing business with positive financial performance. However, the reality, according to the complaint, was that Bitwise frequently faced cash shortages and was on the verge of failure due to an inability to generate sufficient funds from its operations.

The scheme came to light in May 2023 when Bitwise failed to meet payroll obligations and abruptly furloughed and terminated its entire workforce. The SEC contends that Soberal and Olguin resorted to blatant fraud, including creating false financial documents, to deceive investors and raise funds. One instance cited in the complaint involves the defendants allegedly conspiring to send a fake screenshot to investors, purporting to show a company bank account with a $23.4 million cash balance, while the actual account had only $325,100.

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

The SEC's complaint, filed in the U.S. District Court for the Eastern District of California, charges Soberal and Olguin with violating the antifraud provisions of federal securities laws. Both executives have agreed to a partial judgment, pending court approval, which includes permanent and conduct-based injunctions, as well as an officer and director bar. The issues of disgorgement, prejudgment interest, and a civil penalty will be determined by the court at a later date.

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