What is Bitwise? Explaining the rise and fall of the Fresno-based tech company
FRESNO, Calif. (KFSN) -- Bitwise Industries was once a nationally recognized company for its efforts in providing tech opportunities to communities like Fresno but has since fallen on hard times.
The stunning revelations of its financial troubles have left many wondering what led up to the furloughs and what the company was doing inside its large office buildings.
To put it bluntly, Bitwise tried to do a lot before they fell on hard financial times.
What does Bitwise do?
According to its website, Bitwise's mission is to be a transformative tech company offering technology-based solutions for underserved cities. But the company is also a major landlord, renting out offices and coworking spaces in its buildings.
Bitwise pitches itself to customers as a company that could help them meet technology goals like building a website or a mobile app. Many of their services are often built on other companies' products, like Salesforce and DocuSign.
RELATED: Employees at Fresno-based Bitwise Industries being furloughed, leaving hundreds without work
To accomplish this work, the company often hired "apprentices," typically from disadvantaged backgrounds. The apprentices would get on-the-job training and work directly with Bitwise's client base of local companies or government entities. The company called the program a force of good for the communities they were a part of.
Why are we talking about Bitwise?
Bitwise co-founders and co-CEOs Jake Soberal and Irma Olguin Jr. told their 900 employees on Monday, May 29, that they were being furloughed, effective immediately.
Employees were officially laid off on June 14 following weeks of uncertainty after financial issues within the company came to light.
In an email sent to employees, it says it is a "permanent job elimination" that impacts all California locations and others in areas such as Chicago, New Mexico and New York.
Bitwise Industries co-founders and CEOs Jake Soberal and Irma Olguin Jr.were fired as a result of the furloughs.
In an email sent to employees June 2, Ollen Douglass, a Bitwise board member, announced that he took over the role of the company's interim president on June 1. The action was confirmed in a press release sent out by the company after 9 p.m. that night.
Where was Bitwise located?
Bitwise first began in 2013 under the name "Geekwise Academy" and was founded by Olguin and Soberal.
By 2019, they would expand into the facilities known today and have since become a staple of Downtown Fresno with its four colorful buildings and giant signage, often playing host for events such as ArtHop.
RELATED: Financially-struggling Bitwise has not paid city business taxes since 2021, mayor says
Bitwise also grew away from its Fresno base, expanding to buildings in Bakersfield and the Bay Area and outside California in Toledo, Ohio, and El Paso, Texas.
The company was set to expand into Chicago, Buffalo, NY, Greeley, Colo., and Las Cruces, NM.
According to Baltara Enterprises, the real estate company that leases the four downtown locations, Bitwise has not paid rent for over 62 days and the landlord believes Bitwise has abandoned the property. Unless Bitwise leaders take action, the lease will end on June 17.
How did this happen?
Many inside the company thought Bitwise was thriving, but the furloughs revealed the financial troubles the company was in.
In a letter sent to employees, the company warned last week's paycheck might bounce.
After the furloughs were announced, a lawsuit filed by 1861 Acquisition in the New York Supreme Court began to shed light on what may have led to the sudden company-wide furloughs.
During the pandemic, the federal government approved the Employee Retention Credit, which gave a $26,000 payment to companies for every employee they retained in 2020 and 2021.
Since it could take months to get the checks from the IRS, Bitwise sold its $6.1 million in tax credits to 1861 Acquisition under two seperate contracts in October and November 2022.
Documents from the lawsuit show that 1861 Acquisition had agreed to give Bitwise an immediate loan for those credits in exchange for a fee.
Under that agreement, Bitwise was to tell the IRS to send the credits directly to 1861 Acquisition to pay off the loan.
In the event that Bitwise got the credits instead, the company was to send the checks to 1861 Acquisition and not mix it into their other company-related funds.
In late December, 1861 Acquisition's loan servicing company saw that the IRS was preparing to send the credits to Bitwise.
The loan company mailed out a letter to Bitwise on December 23, reminding them that the money was not theirs to deposit.
Records show the IRS sent three checks to Bitwise on December 27, which the tech company then deposited into their bank account on January 3, violating their contract with 1861 Acquisition.
1861 Acquisition filed a lawsuit against Bitwise on April 4th, which led to a judge ruling to freeze the company's bank accounts on April 11th.
A settlement was reached on April 25 after Bitwise promised to pay back the $6 million it owed with nearly $200,000 in interest.
Bitwise also owes the City of Fresno business taxes dating back to September 2021.
The city said they issued several late notices for those taxes, with the latest going out in December 2022.
There have also been reports, unconfirmed by Action News, that Bitwise was in contact with local business leaders in hopes of obtaining bridge loans to help with its financial troubles.
What's next?
Employees of Fresno-based Bitwise Industries were officially laid off on June 14 following weeks of uncertainty after financial issues within the company came to light.
In an email sent to employees, it says it is a "permanent job elimination" that impacts all California locations and others in areas such as Chicago, New Mexico and New York.
The email also told employees they will be able to file for unemployment.
The mayor's office said Bitwise violated California's Worker Adjustment and Retraining or WARN Act by not giving 60-day notice that a furlough was coming.
RELATED: Fresno leaders claim Bitwise violated WARN Act with company-wide furloughs
"I firmly believe Jake Soberal and Bitwise have robbed this city of that time, that critical time," said Fresno City Councilmember Mike Karbassi.
In the days following the furloughs, employees began working to take legal action against Bitwise after pay checks started bouncing.
Roger Bonakdar of Bonakdar Law Firm has assembled a team of lawyers to represent the 100 employees he said had already approached them.
At this time, all avenues are still being considered before the firm and employees decide whether to take the next step toward legal action.
