SEC Charges CEOs of Tech Start-Up in Multi-Million Securities Fraud Case (Bitwise)
On November 9th, 2023, the Securities and Exchange Commission (SEC) announced securities fraud charges against Jake Soberal and Irma Olguin, Jr. Mr. Sobreal and Ms. Olguin Jr. are the former co-Chief Executive Officers (CEOs) of a California-based company called Bitwise. The company is now accused of being a $100 million Ponzi scheme. It took in funds from investors through the United States, including in Florida. Here, our Miami investment fraud attorney describes some of the key things to know about the massive securities fraud case.
SEC Charges: Bitwise Ponzi Scheme
With a main headquarters in Fresno, California, Bitwise was a tech company that was aimed at providing services to underserved communities. The company has now been cited in a large Ponzi scheme case. In a complaint filed in the United States District Court for the Eastern District of California, the SEC names the former CO-CEOs of the firm—Jake Soberal and Irma Olguin, Jr.—as the primary perpetrators of the fraud scheme. Notably, the company suspended operations and terminated all of its employees in the Spring of 2023.
The SEC accuses Mr. Sobreal and Ms. Olguin Jr. of knowingly deceiving investors about the financial health of the company. According to the federal agency, they misrepresented the cash status of Bitwise—as well as its financial history and its earnings—when raising money from investors. In 2022 alone, Bitwise secured more than $70 million in funding from outside investors. Notably the SEC contends that the CO-CEOs provided investors with doctored bank records and a counterfeit audit report, falsely indicating higher cash balances and revenues. They portrayed Bitwise as a thriving, financially sound business. In reality, it was struggling with serious cash shortages.
How Ponzi Schemes Work—and Eventually Crash
Bitwise is accused of being a Ponzi scheme. Broadly described, ponzi schemes are a form of investment fraud built on the foundation of a rather simple, yet wholly unsustainable premise: New investor money is used to pay returns to earlier investors. Most often, the perpetrator fabricates false reports or other deceptive information to give the illusion of a profitable, successful business.
As long as there is a continued flow of new funds, the scheme can maintain the appearance of legitimacy by using the funds from newer investors to pay returns to earlier ones. Of course, all Ponzi schemes are doomed to fail. They rely on a constantly growing pool of investors to remain solvent. The system collapses when it becomes impossible to recruit new investors or when a large number of investors request their funds back in close proximity to each other.
Contact Our South Florida Securities Litigation Attorney Today
At Carlson & Associates, P.A., our Miami securities litigation lawyer invests the time, resources, and attention to detail to help investors get justice. If you sustained investment losses due to securities fraud, we are here to protect your rights. Contact us today for your fully confidential initial case review. With a law office in Miami, we fight hard to protect the legal rights of investors.
Source:
sec.gov/news/press-release/2023-233