Favors, money grabs, incompetence: Bitwise emails with city of Fresno show inside reality

In the year before their company imploded, senior Bitwise leadership tapped connections with city leaders to gain access to public dollars and influence for their business and private projects, a review of email communications shows.

Company leaders had frequent, familiar communication with Fresno city officials. The emails show, in hindsight, warning signs that the company was scrounging for dollars in its final year and that Bitwise leaders were out of their depth when it came to some simple tasks, such as finding businesses to enroll in their digital empowerment program to train Fresno entrepreneurs on technical skills, or providing basic follow-up information, such as salaries and budgets, needed to properly administer and account for the spending of federal grant money.

Among the trove of emails are communications requesting city leaders fast-track a permit for a downtown apartment project that Bitwise co-founder Jake Soberal was championing. In another, a Bitwise executive, since hired for a cabinet position in the Mayor Jerry Dyer administration, pledged reelection support for Dyer in email exchanges. Emails also show that Bitwise Fresno leadership aggressively tried to secure state and federal funding opportunities with the city’s help.

The Bee reached out to former Bitwise board members for comment and attempted to reach Soberal for comment, but his cell number is no longer connected. The Bee contacted Soberal’s lawyer but did not get a response. The Bee left a voicemail and sent an email to Olguin but did not hear back by Monday afternoon.

The Bee also contacted former Bitwise staff members mentioned in this story via phone, email and LinkedIn. No one agreed to speak on the record.

Two former Bitwise senior-level staff members who agreed to speak with The Bee on condition of anonymity said the CEOs’ actions have overshadowed the impact and mission the Bitwise team was trying to accomplish. It made sense for the company to be working with public entities such as the city, they said, given the company and the teams’ commitment to bettering Fresno.

“A lot of really good work happened,” one former staff member told The Bee. “It sucks that it was swallowed up in what the CEOs were doing.”

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Through a public records request filed in June and completed in November, The Fresno Bee reviewed more than 2,500 pages of email exchanges involving Bitwise and city staff and leadership. About one week before the request, over Memorial Day weekend, Soberal and co-CEO Irma Olguin Jr. abruptly announced to Bitwise employees that all of the company’s labor force — about 900 people in Fresno, across California and nationwide — were being placed on immediate furlough.

The company only exists now in bankruptcy court, and it has no employees.

Bitwise co-CEOs Soberal and Olguin are facing federal wire fraud charges after a federal investigation revealed in November they were running an “unsustainable ponzi scheme.” The duo lied to board members, investors, lenders and others about Bitwise’s financial condition to obtain $100 million of investment money and loans, federal authorities said in a press conference in November.

The two former co-CEOs said they were the only ones at Bitwise involved in the criminal activity, according to the FBI’s criminal complaint. They pleaded not guilty to the charges. If convicted, Soberal and Olguin could each face up to 20 years in prison and a $250,000 fine.

Bitwise, which grew over a decade in Fresno, was established in 2013 as a self-described “mothership” for technology-oriented entrepreneurs and companies. The company expanded – at times rapidly – to establish four locations in downtown Fresno, as well as growing its footprint in California. In recent years, it expanded to cities in Wyoming, Colorado, Texas, New York, Ohio and, most recently, Chicago, Illinois.

City leaders long celebrated Bitwise’s vision for job creation, technology and downtown revitalization. In 2016, former Fresno Mayor Ashley Swearengin said of Bitwise’s vision: “We want to run alongside them as fast as they can go.”

Bitwise emails show partnership trend

There’s a trend among cities to develop public-private partnerships as a way to reduce expenses and increase the speed of operations, Naomi Bick, a public policy and local government expert at Fresno State, said in an interview with The Bee.

“We call that the new public service idea where government and business are really closely connected,” Bick said. “It’s unfortunate that we had the Bitwise thing happen to illuminate how these types of situations can go wrong.”

The Bee’s request for an interview with Dyer and other city leaders regarding the email communications and relationship with Bitwise was declined. The mayor provided a written statement that said such two-way communication with a local corporate interest was not unusual.

“It’s common practice for me and those in my administration to roll out the red carpet for anyone developing in downtown Fresno,” Dyer said in the statement. “It’s the very reason why we’ve established concierge liaisons to streamline housing projects in our city, with an emphasis on downtown.”

Milking the city for funding, grant opportunities

In the year leading up to the company’s demise, Bitwise staffers bombarded the city with emails about grant opportunities and potential partnerships with the city in what appeared to be a desperate search for money.

“There was pressure from the top to figure out how to align with government contracts,” one former senior-level staff member said.

The company was successful in securing a $1 million city contract to support small businesses. Records show they made many more attempts, pitching projects outside of their areas of expertise.

In June 2022, a community outreach coordinator for Bitwise Industries emailed an executive assistant in the city’s planning and development department about “how Bitwise can connect with and work with the Fresno homeless community.”

The following month, Mike Major, a former program and financial management officer for Bitwise Industries and Bitwise Impact, the company’s nonprofit branch, submitted a grant application for $150,000 for a violence prevention program through the city’s PARCS department. The funding opportunity came from a $1.8 million grant from the California Violence Prevention and Intervention Program. (Overseeing the grant application process for the PARCS department was Shelby MacNab, a business manager for the department and former Bitwise government partnerships manager.)

The program proposal was for a technology workforce training program aimed at at-risk young adults, the unemployed who have arrest records, and the formerly incarcerated. Bitwise wasn’t awarded any funding, city records show.

Multiple levels of Bitwise leadership were having these types of conversations with city leaders.

Around the same time, additional emails show that Keith Jizmejian, the company’s former vice president of sales, was in touch with PARCS department managers about putting together a 16-week student summer program in web development.

Also in July, Thilani Grubel, former vice president of Bitwise Industries Fresno, emailed the city’s economic development team, Lupe Perez and Laura Diaz, to ask about “local CERF efforts,” referring to the state of California’s Community Economic Resilience Fund, (now called California Jobs First) a multi-million dollar state grant program that was developed to support regional economies as a post-pandemic recovery effort.

“We would love to offer a letter of support and talk about ways that we might be able to help our community,” Grubel said in an email.

In November 2022, Laura Maristany, former vice president of external affairs for Bitwise, emailed Fresno Economic Development Coordinator Laura Rios about collaborating on public grants.

“Specifically, I’m looking to chat through potential federal grant opportunities we could support pursuing that could help align additional resources to keep this great initiative going longer term,” referring to a grant partnership between the city and Bitwise to build a digital resource hub for “hard-to-reach” entrepreneurs.

City of Fresno Director of Communications Sontaya Rose told The Bee in June that an in-house team would complete the project without Bitwise, but she did not respond to The Bee’s multiple requests for an update on the status of the project in January.

City leaders sought partnerships with Bitwise, too

In some instances, city leadership and city council offices would approach Bitwise about pursuing public dollars together.

In February 2023, Laura Rios, chief of staff for Councilmember Annalisa Perea’s office, emailed Grubel about partnering with Bitwise on securinggrants, “since there is lots of funding available from Biden’s Administration,” the email read. They were planning to schedule a meeting the week after Memorial Day, when the furloughs were then suddenly announced amid financial uncertainty.

In a January text message to The Bee, Perea said her office “will always attempt to be as helpful as possible to match local organizations with potential funding opportunities if it means the results will provide opportunities for residents to benefit from.”

City officials and Bitwise were also in touch about a potential partnership with Fresno’s Sister City, Guadalajara, Mexico. Fresno city leaders said in May 2022 they hoped Bitwise would be involved in a technology project with Guadalajara’s tech community.

“There certainly was a lot of pressure” to secure government contracts, a former senior official said, but the relationship was mutually beneficial because local and state governments want to partner with minority-owned businesses like Bitwise. “It looks good for the city,” they said.

City helped Bitwise CEO with personal apartment project

Emails show the type of access Soberal had to city leaders for a personal endeavor.

In June 2022, Soberal’s business partners from a Fresno-based construction company approached him about an 18-unit residential project at the site of the former Bixler Vapor Dry Cleaning Company Building near downtown Fresno, which was experiencing a months-long delay in getting a permit application approved by the city to start construction.

“We’re getting nowhere with … Public Works,” Jeff Krueger, president of AYC Construction, wrote to Soberal. “Do you have any idea who could help push this across the finish line?”

Hours later, Soberal contacted FresnoCity Manager Georgeanne White for help, noting that “Mayor Dyer helped us big time at the beginning of the project.” Within hours, White put Soberal in touch with Terry Cox, project facilitator in the city’s planning and development department.

Cox told Soberal the application review would be completed the following day.

City officials wouldn’t comment on how Dyer helped “big time” with this project. But Bick, of Fresno State, said the request sounded routine.

“Sometimes emails just help things get to the top of the stack,” she said. “That’s actually pretty common in a city like Fresno.”

It isn’t immediately clear if or how far the construction project progressed, or how exactly Soberal was involved. AYC Construction, the Fresno-based construction company, lists Bitwise Beehive, one of the tech company’s three former downtown locations, among its clients on its website.

After repeated attempts to reach Krueger and AYC Construction’s Chief Executive Andrew Young, the CEO said he had no comment. Business filings with the California Secretary of State indicate that Soberal was removed from the partnership that owns the building in August 2023.

Other emails show the kind of access Bitwise leaders had – or thought they had – to the mayor.

Soberal emailed Dyer in February 2023 for help reserving city park facilities for an annual father-child camping trip.

“Emailing with a quick question,” Soberal wrote to Dyer. “Is it possible to rent Camp Fresno for a group of ~40 people June 30 to August 2?”

The city’s PARCS website has specific instructions and contact information on how to reserve the space. It appears that Dyer didn’t respond directly to the request and forwarded Soberal’s email to his then-deputy mayor Matthew Grundy.

Bitwise appeared to lack connections for city-funded work

When the company was awarded a $1 million contract from the city, it didn’t have the connections necessary to reach their target communities.

In February 2023, Zayn King-Dollie, a former government partnerships account manager with Bitwise Industries, emailed Rios, the economic development coordinator with the city, for help contacting diverse business leaders.

“Quick question for you - do you happen to know anyone at the Hmong and Punjabi Chambers of Commerce our team at Bitwise could reach out to regarding the Small Business Digital Empowerment Program?” King-Dollie wrote.

“And backing up a bit – can’t remember if these Chambers even exist in Fresno?”

In a separate email, King-Dollie also asked a city staffer how Bitwise would be paid the $1 million funding award for the project. Half was paid up front and the second half was scheduled for payment upon completion of the project’s first performance review.

He asked: “Is this flexible at all?”

In June, Fresno City Council voted to terminate the $1 million contract with Bitwise, which had already received $500,000. According to the project budget, $638,000 of the million-dollar contracts was to fund salaries and benefits for seven full-time and one part-time employee.

“It was a good program,” said one of the former staff members who spoke with The Bee. “I’m sorry that it didn’t work out.”

Insights into Bitwise accounting, operations

After Bitwise was successful in securing a contract with the city, they didn’t or couldn’t provide key details on compensation or accounting as required in project reports related to the funding.

In September 2022, the city’s grant unit emailed a couple of forms for Bitwise to complete as part of the funding process for federal stimulus funds. The city asked for specific information required by the U.S. Department of Treasury – including the salaries of the top five compensated employees.

In response, former Bitwise Director of Legal Operations Alissa Turnipseed emailed city staff to confirm if this information was required.

“If it is required,” Turnipseed asked, “can you let me know where this information will go and if it will be publicly available?”

A few weeks later, the city staff told Bitwise that they didn’t need to provide the information if they were already registered in the federal government’s federal contract award system, SAM.gov.

In January 2023, Vanessa Bryant, a senior management analyst in the city’s finance department asked former Bitwise Senior External Affairs Manager Erin Hustings for a general ledger showing the line-by-line expenses in their accounting system as part of the reporting for their $1 million grant.

Hustings responded by sending over their project budget, saying that “in our accounting software we don’t track payroll by individual.” It’s not clear from the emails if they ever shared the ledger with the city’s finance team, but federal authorities alleged in their complaint against the co-CEOs that Bitwise was not using standardized accounting practices, known as Generally Accepted Accounting Principles, or GAAP.

When asked by reporters in June 2023 why the city awarded the company a contract when it hadn’t paid taxes for over a year, city leaders said, moving forward, there needs to be a “comprehensive check-off system,” ensuring companies have a current business tax certificate before entering contract agreements with the city.