Texas company alleges Bitwise illegally borrowed millions against properties it owns

Tim Sheehan
·5 min read
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UPDATE 10:30 P.M.: A Fresno judge has issued a temporary restraining order against Bitwise Industries and subsidiaries freezing bank accounts related to a lawsuit filed this week by Texas company NICbyte LLC over properties in Fresno, Bakersfield and Oakland.

Fresno County Superior Court Judge Jeffrey Hamilton signed the order Wednesday afternoon. It locks up five separate bank accounts, each belonging to a Bitwise affiliate company controlling the five pieces of property. It also orders the company to “immediately cease, desist and stop all sale efforts of all five of the properties ….”

Additionally, Hamilton’s order requires one of the Bitwise subsidiaries, Wishon Row LLC, to turn over to NICbyte “all books, leases and records” related to the five properties, and from “diverting or using any of the rents from the properties for purposes unrelated to the properties or management of the properties. …”

The temporary restraining order will be in effect through June 17. In the meantime, Bitwise Industries co-CEOs Jake Soberal and Irma Olguin Jr. and Bitwise subsidiaries have been ordered to show cause why the court should not impose a preliminary injunction that would extend the conditions of the temporary restraining order while the lawsuit is pending.

ORIGINAL STORY:

A Texas company is filing suit against Bitwise Industries and a collection of affiliate business enterprises alleging breach of contract and other financial misdeeds related to Bitwise properties in Fresno, Oakland and Bakersfield.

NICbyte LLC asserts in the lawsuit, filed Tuesday in Fresno County Superior Court, that it is an 95% majority investor in a joint agreement with Bitwise and several of its subsidiaries, following a contribution of almost $35.5 million to the venture that owns five Bitwise buildings.

The lawsuit alleges that Bitwise illegally borrowed almost $30 million in loans using the buildings as collateral, and also listed four of the five properties for sale without legal authority to do so.

And it’s at least the second lawsuit against Bitwise over the old State Center Warehouse building in downtown Fresno.

The lawsuit comes on the heels of Bitwise co-CEOs Jake Soberal and Irma Olguin Jr. announcing late Monday that the company had furloughed all of its employees in Fresno and other locations in California and the U.S. Soberal said the company had about 900 employees across the country.

Attorneys for NICbyte state that the Texas company entered the joint venture with Bitwise subsidiary Wishon Row LLC, in June 2022 “for the purpose of acquiring five real properties in Fresno, Kern and Alameda counties.” According to the suit, NICbyte contributed 95% of the money needed for the deals.

All five of the acquired properties were previously owned or controlled by BW Industries Inc., a holding company for the wide array of Bitwise operations. BW Industries subsequently leased the buildings back from the joint venture.

Acting without legal authorization to borrow or sell

But, the lawsuit alleges, Wishon Row “has breached the joint venture agreement in myriad ways since the early days of the joint venture, including:

  • Taking out several unauthorized loans for millions of dollars against the properties without approval by NICbyte.

  • Listing four of the properties for sale without NICbyte approval.

  • Failing to provide to NICbyte required financial reporting and bank statements for 2023.

“Only on May 26, 2023 did plaintiff discover the true extent of (Wishon Row’s) bad acts and material breaches,” NICbyte attorney Stephen Sutro wrote in the court document.

From December 2022 through March 2023, the lawsuit alleges that Wishon Row entered into loan agreements secured by the various properties owned by the joint venture. Those loans amounted to almost $30 million. “The loans were entered into without NICbyte/Investor’s required approval or consent …,” the complaint states, “meaning (Wishon Row) lacked the legal authority to do so.”

“In fact, (Wishon Row) failed to even disclose these actions and did so secretly and for its sole benefit — not for the benefit of the joint venture,” the lawsuit adds.

The actions by Bitwise and its subsidiaries “have put (NICByte) at risk of losing nearly its entire investment amount,” the suit alleges. “NICByte/Investor does not have any knowledge as to where the loan proceeds have gone, whether (Wishon Row) still possesses them, or if they even still exist.”

Delinquent taxes also an issue

As a tenant of each of the buildings under the joint venture, BW Industries is responsible for paying property taxes and other costs. The lawsuit alleges that BW Industries is delinquent and owes more than $32,000 in property taxes on three sites in Bakersfield, more than $63,000 for the former State Center Warehouse property on R Street near Ventura Street in downtown Fresno; and more than $35,000 on a building and property in Oakland.

The lawsuit seeks a restraining order and injunctions against the various Bitwise enterprises to freeze transactions for accounts associated with Wishon Row and other BW Industries enterprises involved in the property ownership; to immediately order that the four properties listed for sale be taken off the market and any potential sales blocked; to prevent the Bitwise enterprises from damaging or disposing of any fixtures on the properties, or collecting and diverting rents; and taking any action to “impair the preservation of the properties.”

Soberal, one of the co-CEO for Bitwise, did not immediately respond to text messages from The Fresno Bee seeking reaction to the lawsuit.