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As part of their guilty plea agreement to wire fraud, the former CEOs of Bitwise Industries agreed to pay up to $115 million restitution to the investors and lenders they ripped off.
But one expert GV Wire spoke to and the federal government downplays the chances that victims will be made whole.
“Most of the time (defendants) use that money to fund a lifestyle or to fund a business or to do something. And by the time they get charged and arrested, they no longer have the funds. And then in other cases … someone has, over the years, done things to convert that money either into assets that are protected or untouchable,” said criminal defense attorney Todd Spodek.
“By the time they get charged and arrested, they no longer have the funds.” — Attorney Todd Spodek
Spodek is based in New York, but has a Los Angeles office. He specializes in financial crimes. He is not directly involved in the Bitwise case, but he has been paying attention.
The Department of Justice accused Jake Soberal and Irma Olguin Jr. of lying, cheating and falsifying documents to keep their company afloat amid a financial collapse. Avoiding a trial, the pair changed their pleas last week to guilty.
Even in its own website, the federal government says not to count on full restitution.
“Unfortunately, as a practical matter, a defendant who has no money or potential to make money may be unlikely to ever make meaningful restitution to the victims of a crime,” the U.S. Department of Justice says, explaining restitution.“Chances of full recovery is very low.”
Related Story: Community Reacts to Social Media Apology From Guilty Bitwise CEOs
Who Gets Paid First?
Victims would share any money equally as it comes in, Spodek said.
“There’s some sort of schedule and it’s pro-rated based on the losses. And each victim receives a share,” Spodek said.
There is not necessarily a pecking order of who gets paid first. When money comes in, it will be distributed to all the claimants proportionally.
The DOJ has not identified all potential victims in court documents but does say there are at least 10. Only victims of the actual crime would be eligible for restitution, which could leave many unpaid employees and vendors out in the cold. Victims would need to reach out to the court to receive any restitution money.
The federal probation office will examine Soberal’s and Olguin’s financial information to determine how much the defendants have. The plea deal requires cooperation. Spodek said the DOJ is responsible for enforcing the restitution order, which will be distributed by the clerk of the court.
The plea deal also includes a forfeiture agreement, in which Soberal and Olguin agreed to give up any purchases made with ill-gotten gains.
The criminal victims would have first crack of collecting money, ahead of bankruptcy creditors. The government has 20 years to collect on behalf of victims, once the sentence is final.
“The judge has the authority to order restitution as part of sentencing, and it’s based on the evidence in the case, so it’s based on the victims’ losses. So in that particular case, it’s a significant amount because of the amount of the fraud and the losses from the individual investors,” Spodek said.
Court documents state that the ill-gotten money “went towards paying the company’s payroll, outfitting office spaces, repaying debts owed to prior investors and lenders, and expenses incurred in the company’s ordinary course of business.”
Bitwise filed for bankruptcy in June 2023, weeks after it laid off its estimated 900 employees, and the Bitwise board fired Soberal and Olguin. The board, in court documents, said the pair lied to them as well about the financial health of the company.
Bankruptcy documents list dozens of people and entities Bitwise owes. Subsequent civil lawsuits revealed some of those that Soberal and Olguin bilked which could be entitled to restitution in the criminal case, including Catalyst Communications, NICBYTE and Agri Capital.
The criminal victims would have first crack of collecting money, ahead of bankruptcy creditors. The government has 20 years to collect on behalf of victims, once the sentence is final.
Federal restitution law does not allow Soberal and Olguin to get out of paying by filing for personal bankruptcy.
Related Story: I Am a Former Bitwiser and This Is My Story
What Assets Do Soberal and Olguin Have?
Some of the wages earned by Soberal and Olguin, whether in custody or once they are released, would go toward restitution.
Click herefor GV Wire’s coverage of Bitwise.
The indictment filed last year stated that Soberal and Olguin earned salaries of $600,000 each before the company failed.
Real estate records show that Soberal and his wife Sarah Soberal own a Tower District area home. Real estate website Zillow estimates the value at $544,000.
Olguin owns a home in Port Orford, Oregon, with a Zillow estimate of $795,000.
Soberal used his home, and Olguin used her mother’s home in Caruthers as collateral for bond after the pair initially pleaded not guilty last year.
Spodek said the defendants might be allowed to keep some things of value.
“In a case like this, they would likely negotiate some sort of resolution where they keep some of the assets and some money for their family to live,” Spodek said. “It’s not like the government just takes everything.”
Such items are up for negotiation, Spodek said.
Soberal and Olguin Engaged in Real Estate Sales
Real estate records show Soberal and Olguin engaging in buying and selling several properties over the last few years.
The Soberals bought a home in April 2021 — next to their current residence — for $320,000 and sold it three months later for $400,000.
The couple also flipped a home in 2023 a few blocks away, netting a $23,000 profit in three months.
Olguin sold two homes in 2023. She sold a central Fresno home — bought in 2020 — for $330,000, netting a $95,000 profit. Another central Fresno home bought in 2022 for $220,000, sold in November 2023 — weeks after she pleaded not guilty to the fraud charges — for a $68,000 profit.
The Soberals, Olguin, and former Bitwise president Bethany Mily, invested in a home near Fresno City College in 2021. In eight months, they made a $159,000 profit after the sale.
Sentencing in November
Soberal and Olguin return to federal court Nov. 6 for sentencing. As part of the plea agreement, the federal government will not pursue any other charges, and recommend the low end of sentencing guidelines — 151 months. The defendants can make a recommendation of no lower than 60 months.
Ultimately, it is up to the judge — so far unassigned — to pass final sentence.
