Bitwise Industries board fires co-CEOs Soberal and Olguin Jr. in wake of furloughs

Jake Soberal and Irma Olguin Jr., co-founders of embattled Fresno technology/real estate business Bitwise Industries, have been terminated from their positions as the company’s co-CEOs.

Ollen Douglass, a founding board member of the Motley Fool Foundation and a Bitwise board member since 2021, advised the company’s employees and others in an email Friday evening that the board voted to terminate Soberal and Olguin. Douglass added that he has been appointed as the interim president of Bitwise.

Douglass is the CEO of Hanover Street Advisors, a consulting firm working with early-stage venture-backed companies. He previously spent 22 years with The Motley Fool before departing about a month ago, according to his LinkedIn profile.

“Unfortunately, the non-management board and I, like many of you, are finding out that the picture the company consistently communicated orally and in presentations, was not an accurate picture of the company’s financial health,” Douglass wrote. “It is heartbreaking and disappointing on multiple levels, as you know.”

”We are committed to finding out how this happened and taking appropriate actions,” Douglass added.

Soberal and Olguin jointly founded Bitwise Industries 10 years ago as a self-described “mothership” of technology entrepreneurship in Fresno and over recent years has expanded the company to other cities in California and across the U.S.

But on Monday night, Soberal and Olguin told The Fresno Bee that “unexpected” financial troubles forced the company to take the drastic step of furloughing all of its employees – about 300 in Fresno and a total of about 900 nationwide – effective immediately.

The firings of Soberal and Olguin are the latest twists in the tale of what appears to be a company that has shown signs of financially unraveling for weeks, if not longer.

“The board of directors has begun an investigation into what led to these current circumstances and events and is engaging independent experts for support,” according to a press release Bitwise issued late Friday. Soberal told The Bee earlier this week that the board met on Monday “and the difficult decision was arrived at that it was in the best interest of the company to furlough all employees effective immediately.”

“It was an incredibly difficult decision to suspend operations at Bitwise Industries and furlough the hardworking team members,” Douglass said in Friday night’s statement. “The board of directors was recently made aware of the company’s cash deficit by management and took immediate action as a result.”

A litany of recent financial troubles

Earlier this year, Bitwise and Soberal were sued in New York by a company that had purchased federal pandemic-relief tax credits from Bitwise. The lawsuit accused Bitwise and Soberal of breach of contract and fraud, alleging that Bitwise received and deposited the refund checks from the U.S. Internal Revenue Service totaling almost $6.2 million, in violation of its contract to forward the checks or the money to buyer 1861 Acquisition LLC.

That suit, filed in early April, was settled and dismissed on May 1 after Bitwise agreed to pay 1861 Acquisition the amount of the tax refunds that it had sold to 1861, as well as interest. The total payout for the settlement was almost $6.4 million, less than a month before the companywide furloughs were announced.

On Tuesday, a Texas company sued Bitwise in Fresno County Superior Court, alleging that it has a 95% ownership stake in five Bitwise properties: three in Bakersfield, one in Oakland, and the historic former State Center Warehouse building on R Street in downtown Fresno. The lawsuit asserts that Bitwise pledged the buildings as collateral for about $30 million in loans, and sought to list for sale four of the buildings including the State Center Warehouse, without legal authority to do so.

On Wednesday, Fresno Mayor Jerry Dyer disclosed that Bitwise Industries had not paid its city business license taxes since September 2021, and added that the city’s position is that the furloughs, for which no advance notice was provided to either employees, violated California’s Worker Adjustment and Retraining Notification, or WARN, Act. The state law requires employers to give at least 60 days’ advance notice not only to workers affected by mass layoffs, but also to the state Employment Development Department and the local city or county government officials.

On Thursday, Fresno City Councilmembers Mike Karbassi and Nelson Esparza announced their intention to propose a resolution to terminate a $1 million grant contract with Bitwise Industries underwritten by federal American Recovery Plan Act money. The city had disbursed $500,000 to Bitwise earlier this year for the first half of the contract, with the rest due upon completion of the task of developing a Digital Empowerment Center to help small businesses learn how to use technology to increase their processes and commerce.

Fresno City Attorney Andrew Janz said violations of the WARN Act carry stiff penalties, including fines of up to $500 per day per affected employee, as well as back pay and payment of health benefits or health costs for employees to cover the 60-day notice period.

Karbassi said he was not only concerned about the potential WARN Act violations, but also revelations that Bitwise had, for several months, been continuing to take deductions from employees’ paychecks for contributions to workers’ 401(k) retirement savings plans, but had not deposited those funds with the plan administrator.

On Friday, Baltara Enterprises LP, the owner of three buildings Bitwise operates in Fresno, posted notices of abandonment on the doors of the buildings, indicating that Bitwise was at two months behind on its lease payments. Those downtown buildings are the Bitwise headquarters at Bitwise South Stadium at 700 Van Ness Ave., Bitwise 41 at Ventura and R streets, and the Bitwise Hive at Ventura Street and Santa Fe Avenue.

Earlier this year, Bitwise announced it had secured an $80 million infusion of capital from investors including Goldman Sachs Asset Management, Citibank, The Motley Fool and the Kapor Center. That is the single largest one-time investment that Bitwise had received to date, and brings to a reported $157 million that Bitwise had secured over several rounds of venture capital investments in recent years.

What happened with that money is not clear.

In March, Fresno County filed tax liens against the Bitwise South Stadium building at 700 Van Ness Ave. in downtown Fresno. The same property was subject to a certificate of delinquency of personal property taxes in May 2022 and September 2020.