
Fresnoās infamous Bitwise Industries saga continues as court proceedings are scheduled this summer, and chatter persists about the embroiled company and its scheming co-CEOs, Jake Soberal and Irma Olguin Jr.
The pair faces a charge of conspiracy to commit wire fraud. The prosecution says they bilked investors and lenders of $100 million. They could spend 20 years in prison and be forced to pay a $250,000 fine.
It is expected they will make a plea bargain.
Mark Arax, Fresnoās bestselling author of The Dreamt Land and The King of California, saw a side of Bitwise that was different from what most people experienced. Because he had a friend who was an early Bitwise investor, Arax found himself in a room with Soberal and Olguin at the companyās inception in 2013.
āAbout halfway through that meeting,ā Arax recalled, āI just got this kind of creepy sense that they were too slick for their own goodāespecially Soberalāand that the model of what they were trying to do just didnāt make sense.ā
A year or so later, Araxās investor friend got āfleecedā but was ātoo embarrassed to really talk about it or bring a lawsuit.ā Arax tried to have a Bitwise contractor build him a website, and that was a failure, causing him to write several letters of complaint to the company. Family and friends took Bitwise classes in coding but came away saying that they knew more than the instructors.
After a while, Arax said, āWhenever I went talking to city leaders and state leaders, and the Bitwise subject came up, I would tell them that I thought that Bitwise was just a Ponzi scheme.
āThere were people, maybe you could call them āCassandras,ā I donāt know. There were people sounding the alarm asking, āwhat is this thing?ā But no one wanted to listen.
āAt the end, Soberal and Olguin got so desperate they were hitting up all these westside farmers and other wealthy people in Fresno in an attempt to bail Bitwise out. Some of them gave some dough thinking that they were going to triple and quadruple their money.ā Instead, those people lost it all.
Arax makes a keen analogy between Bitwise and the classic musical, The Music Man. The story line is that a con artist, Harold Hill, comes to a medium-sized city in the Midwest, River City, and convinces folks that they are in cultural peril. Then he sells them on the idea of him leading a marching band for their children as a kind of social panacea.
The truth is that Hill actually knows little about music and is just after a quick buck. Finally, the citizens of River City find out heās a grifter but they are so taken by the sight of their children in uniforms managing to play a little music on their instruments that they forgive him.
Bitwise offered a social panacea to Fresnoātech training for youth from Fresnoās underserved communities and tech help for small businesses. Fresno was big enough to have resources to draw upon but not so sophisticated that officials or the public would find out what was really going on. Three mayors in succession were Bitwise supporters.
āLike The Music Man, they [Soberal and OlguĆn] were selling flim-flam,ā Arax said.
Miguel Arias, the Fresno City Council member representing downtown, explained how Bitwise for him was a mixed bag. Aside from the criminal behavior and the disaster of the companyās implosion, Arias had reasons to appreciate it.
Arias explained, āThe reason I liked them [at first] is that they were a company that never received a penny of City funds. Most of these big companies, to relocate in Fresno or to expand in Fresno, always ask for incentives. Amazon was given $30 million. Alta was given $17 million. The Gap was given $10 million in incentives.ā
Bitwise was a unique company, he said, because it āhad grown to about 500 employees in Fresno without ever receiving any incentives from Fresno or any waivers of fees.ā
Arias also emphasized Bitwiseās modernization of historic buildings. āThe old way of āFresno thinkingā when it comes to downtown development was to tear down the building, the historical building, and start from scratch. Itās cheaper. Very few developers went and renovated the existing buildings because they didnāt believe there was a market for them.
āBitwise demonstrated that there was a market for renovated old buildings. And thatās why all their buildings are fully leased.ā
When the pandemic occurred, the U.S. government made $10 million in American Rescue Plan funds available to the City of Fresno for nonprofits. Many applied, and Bitwise, through its nonprofit arm, was approved for $1 million. It was meant to be spent on ādigital empowerment.ā
Per the terms of its agreement with the City, Bitwise needed to spend its own money on the program and then get reimbursed. āWe [the City] donāt give you a million dollar check,ā Arias said.
Before being reimbursed, Bitwise had to invoice the City for work done, showing documentationāreceipts and invoicesāthat the work took place. Bitwiseās nonprofit arm did much better bookkeeping than the corporation; it acted legally and fulfilled the agreement for three months, spending $100,000 per month.
āThey had been awarded money to train small businesses in expanding and doing social media advertising and marketing,ā Arias said. āIf you were, like, an up-and-coming street vendor and you donāt have an Instagram, you donāt have any social media, they were contracted to help you do that.
āThe thing about the Bitwise experience [with the City] is that everything worked the way it was supposed to.ā Until it didnāt.
āBy the time we caught on and this whole thing went public, we had cut them a check of about $300,000 for the first quarter.ā Bitwise never saw the other $700,000. Arias said it was the only time in five years that money awarded by the City was not totally disbursed.
Andrew Janz, Fresnoās City attorney, seconded Arias that the City of Fresno was not ripped off by Bitwise. āItās fair to say that a lot of people are disappointed, and a lot of people have hurt feelings over the issue,ā he said. āThatās obvious.ā
However, he added, āMy understanding is we had proper procedures in place to safeguard against any fraud against the City.ā
āAt the end of the day,ā Arias concluded about Bitwise, āwhen all the chips fell, they had 75 marketing specialists, 75 marketing specialists!
āA $4 billion organization, [the] Fresno Unified [School District], with 10,000 employees, has one marketing person. A hospital systemāValley Childrenās or Community Medical Centerāwith billions of dollars of assets might have two or three marketing people.

āYeah. Seventy-five marketing people? Crazy! So who was generating the revenue?
āThose folks should be in the movie production business; they were a master class in painting the picture that everyone was desperate to buy.ā
Arax said, āThe power of wanting to believe is really an extraordinary force. Thatās one of the major elements in many of these consāit was an illusion.
āThe whole thing was an illusion.ā
Thanks for an up to date summary of the fall of Bitwise. I believe a movie will be done on the technological hope of the City of Fresno and the financial ignorance and greed of two tech entrepreneurs that lead to the downfall of Bitwise Industries. A lot of young people lost their careers and jobs when Bitwise crashed, one of them was my son who was starting a career as a software engineer at Bitwise.