On Thursday, the Securities and Exchange Commission (SEC) announced it had charged Jake Soberal and Irma Olguin, Jr., former co-CEOS of Bitwise Industries Inc., with misleading investors as they worked to raise $70 million in start-up funds.
According to the SEC, Soberal and Olguin made material misrepresentations and falsified documents concerning Bitwise’s cash position and historical financial performance while raising funds in 2022. The SEC’s complaint said the two created and provided investors with falsified bank records and a fake audit report that showed inflated cash balances and higher revenues that Bitwise actually generated. Soberal and Olguin’s alleged misrepresentation painted the company as a healthy, growing business with a favorable financial performance, while in reality the company faced constant cash shortages and was often on the brink of failure.
Officials said the scheme came to light in May 2023 when the company could not make payroll and abruptly furloughed all of its employees. The company then terminated its hundreds of employees soon after.
Soberal and Olguin knew the company faced cash shortages and knowingly misrepresented the company’s financial position, officials said in the complaint.
“We allege that Soberal and Olguin resorted to blatant fraud, including the creation of fake financial documents, to deceive investors and raise money,” Monique C. Winkler, Regional Director of the SEC’s San Francisco Regional Office, said. “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.”
According to the complaint, filed in the U.S. District Court for the Eastern District of California, Soberal and Olguin are charged with violating the antifraud provisions of the federal securities laws. Each have agreed to an entry of a partial judgement, subject to court approval, imposing permanent and conduct-based injunctions, as well as being barred from being an officer or a director of a company. The two will also face civil penalties to be determined by the court.
The U.S. Attorney’s Office for the Eastern District of California (USAO) announced criminal charges against Soberal and Olguin.