Bitwise employees jump into bankruptcy case with claims for ‘stolen’ wages, deductions

Tim Sheehan
·5 min read

Former employees of Fresno-based Bitwise Industries, the bankrupt technology training, tech services and real estate development company, are getting in line in a federal bankruptcy court to see how much money – if any – they may recover in lost wages.

Dozens of employees who were first furloughed by the company on May 29 and permanently laid off on June 14 have submitted claims to the U.S. District Bankruptcy Court in Delaware. That’s where Fresno-based BW Industries Inc., the embattled parent company of Bitwise Industies and other associated companies, was incorporated and filed for bankruptcy on June 28.

Whether employees – or any other creditors – receive anything at all is very much in question. “No property appears to be available to pay creditors,” according to June 29 notices sent out by the bankruptcy court for an Aug. 3 meeting of creditors in Delaware. “Therefore, please do not file a proof of claim now.”

Jeoffrey Burtch, who has been appointed as the bankruptcy trustee in the Bitwise cases, confirmed to The Fresno Bee on Friday that the bankruptcy court clerk has not set a deadline for creditors to file claims against the companies because of the lack of apparent assets to liquidate to repay creditors.

Nearly 900 Bitwise employees, including almost 400 in the greater Fresno area, lost their jobs with the abrupt furlough announcement. For many, the final paychecks issued to them bounced. Employees also report that deductions from their paychecks for the company’s 401(k) retirement savings plan were never deposited with the plan administrator.

BW Industries Inc., Bitwise Industries Inc., Alpha Works Technologies LLC, BWRD LLC and Bruces Bagels, Beverages & Bites all filed Chapter 7 bankruptcy petitions on June 28. A Chapter 7 bankruptcy is intended to liquidate a company’s assets in order to pay creditors.

By Friday afternoon, nine days after the bankruptcy filing, at least 85 former employees have filed claims with the bankruptcy court totaling almost $1.1 million in what some workers have called “stolen” wages and employee deductions. Many more claims could be expected as the cases progress.

Among those filings, about $405,000 is claimed by employees to be “priority” unsecured claims.

Different levels of priority for possible recovery of money

Creditors in bankruptcy cases fall into certain tiers, each representing a place in the pecking order for potential recovery of what’s owed to them after a company’s assets are sold:

  • Secured creditors: The highest priority for repayment from the liquidation or sale of whatever company assets exist are those whose loans or investments were secured by some sort of collateral, whether property or interests in the company itself. The Fresno Bee’s examination of court documents in the Bitwise Chapter 7 cases indicates the companies had almost $27.6 million in outstanding loans that were presumably secured or guaranteed by personal property or by membership interests in the companies.

  • Priority unsecured creditors: Unsecured creditors include government entities to whom taxes and other fees are owed by a company, as well as employees who are owed wages that were not paid before the bankruptcy filing. Among unsecured debts listed as “priority” claims in the Bitwise cases are 68 outstanding tax bills owed to 22 states as well as the District of Columbia and the U.S. Internal Revenue Service; and more than 860 employees owed unpaid wages from the bankrupt companies The amounts for nearly all of those priority unsecured creditors are listed as “undetermined” in court documents.

  • Nonpriority unsecured creditors: The lowest tier of debts in repayment pecking order are unsecured “nonpriority” claims. In the Bitwise cases, 229 claims are identified in court documents as unsecured nonpriority claims. Those include 123 loans received by Bitwise Industries entities amounting to at least $77 million – including a handful of venture and private loans.

Some claims accuse Bitwise of wage theft

The claims for unpaid wages filed through Friday afternoon come not only from Bitwise Industries employees in Fresno and the central San Joaquin Valley, but also northern and southern California as well as Colorado, Florida, Georgia, Hawaii, Illinois, Maryland, New Mexico, New York, North Carolina, Ohio, Virginia, Washington and Wisconsin.

Many of the claims attached images of notes from their banks notifying them that their Bitwise paychecks had bounced.

At least six of the former employees who have filed claims accused the company of wage theft or stealing their payroll deductions for 401(k) savings. One claimant from Clovis wrote in his claim for almost $11,000 that Bitwise “stole four pay periods of taxes and my 401(k) contributions and 1.5 weeks of salary.”

Many of the claimants included notes from their banks notifying them that their Bitwise paychecks had bounced.

Some of the claims also note violations of the Worker Adjustment and Retraining Notification, or WARN, Act, which under both federal and state law require companies to provide at least 60 days advance notice of mass layoffs. Two class-action lawsuits have already been filed against Bitwise – one in federal court, the other in Fresno County Superior Court – over WARN Act violations by the companies.

Sources confirmed to The Fresno Bee last week that state and federal agents are conducting criminal investigations of Bitwise Industries and its leaders over their activities leading up to and in the wake of the company’s financial implosion.

Additionally, the company is facing multiple civil lawsuits from investors and others for breach of contract and bad-faith financial dealings.