Breaking News: Bitwise Industries Fires Co-CEOs

Breaking news (also referred to as breaking coverage or news flash) is an interrupted news story. Typically used in radio and television broadcasting to indicate an immediate news event is taking place that requires interruption of scheduled programming for reporting, breaking news is typically defined as interruptive news coverage that requires immediate interruption in order to report its details. Bitwise Industries of Fresno announced on Saturday that its board of directors has fired co-CEOs Irma Olguin Jr. and Jake Soberal following an investigation into what caused its collapse. Ollen Douglass Appointed Interim Chairman As word of Bitwise Industries' impending employee furloughs spread last week, including 300 workers in Fresno alone, many questions surfaced regarding its finances and co-founders. On Friday, however, Ollen Douglass of Bitwise board announced that co-CEOs Jake Soberal and Irma Olguin Jr. who orchestrated mass layoffs had been fired; Douglass will assume their roles as interim president for Bitwise until further notice. Soberal and Olguin established Bitwise 10 years ago as a "mothership" of technology entrepreneurship in Fresno. Since then, their operations have expanded into other cities throughout California and across the U.S. Bitwise offers workforce training to disadvantaged people as part of its software development company; manages real estate for offices; and offers real estate development for offices or tenants. Douglass revealed that the board discovered that Bitwise misrepresented their financial picture both orally and visually, suggesting a possibly illegal method for raising money. For example, they pledged their buildings as collateral against loans they took out and attempted to list them for sale without legal authority--such as Fresno's historic State Center Warehouse on R Street--without legal grounds for doing so. The board was also concerned with how the company acquired its debt and equity financing, and how that financing was structured. Douglass stated he will carefully examine all issues raised by the board; should further investigation into its financial collapse become necessary, a special committee may be appointed by him to investigate such facts. Bitwise recently received a $24 million investment from investors such as Goldman Sachs Asset Management, Citibank, the Motley Fool and Kapor Center. Bitwise has been amassing investments similar to this over time as it implements its Silicon Valley-inspired business model of purchasing rundown properties to transform them into tech hubs in underserved communities. This investment represented one of the largest single one-time investments made this year to a technology startup, and came soon after Fresno awarded Bitwise $500,000 from American Recovery Plan Act funds for development of a digital hub to assist small businesses use software tools for sales and commerce. Bitwise's future remains in question as organizations that gave grants and loans have already suspended payments to Bitwise; others, like Van Ness and Jefferson Avenue's Jefferson Center project are considering how best to proceed with them. Employees now face an arduous decision between staying with their former company as it struggles to recover or finding other work; many have left for other positions within Fresno tech communities while some have accepted positions at other firms such as Gibson Brands and Rand Logistics. Irma Olguin Jr. Appointed Executive Vice President Jake Soberal and Irma Olguin's 2013 founding of tech hub Bitwise Industries was in response to systemic poverty communities experiencing hardship. Their goal was to establish tech economies in what they called underrated cities by training workers, developing software applications and investing in tech-friendly real estate properties. Bitwise's rapid expansion saw them attract investment capital and attract top talent, but there were problems too: Bitwise's co-CEOs suddenly announced this week that all employees would be laid off without warning or explanation. Since then, the board of directors has suspended operations of the company and fired its two leaders, while initiating an investigation into what led to financial instability. Ollen Douglass will serve as interim president beginning June 1. Douglass is an investor and founder of Hanover Street Advisors, which advises venture capital-backed start-ups. With more than three decades of finance experience as both CFO and investor, Douglass will use this experience to lead the investigation into Bitwise. Bitwise owns properties across the country, from the State Center Warehouse on R Street in Fresno to Toledo Ohio's former Jefferson Center, according to Forbes. They have raised approximately $50 Million from investors such as Kapor Capital, JPMorgan and Motley Fool Ventures. In February, ProMedica and Alliant joined forces to open an innovation center in Toledo. The Jefferson Center building originally constructed as Toledo's central post office will serve as home for this incubator of various technology and non-tech businesses. Seagate, which manufactures disk drives used in personal computers, is currently experiencing a challenging market environment due to slow computer sales and oversupply of disk drives. Their stock has decreased by half this year while sales have steadily decreased; Seagate reported losses exceeding $530 million for their most recent quarterly earnings report - the worst showing in three years. Bitwise's expansion has also been limited by financial issues; some investors owed money and some loans are late being paid back. Bitwise also encountered regulatory difficulties; Fresno City Attorney is alleging that Bitwise improperly deducted funds from employee paychecks for contributions to their 401(k) retirement plans without depositing them with plan administrators, in violation of federal rules. Fresno Mayor Steve Karbassi, Economic Development Director Greg Esparza and City Attorney Andrew Janz were not available to comment on whether Bitwise could face criminal charges for its actions; however, City Attorney Janz indicated that should Bitwise violate any federal wage and hour laws, overtime regulations or 401(k) requirements, his findings would be forwarded on to federal law enforcement officials for further consideration. Jake Soberal Appointed Executive Director Bitwise Industries' Board recently took immediate steps to suspend company operations and begin layoffs of employees, as well as to appoint an interim president and initiate an investigation into its financial collapse. Furthermore, co-CEOs Jake Soberal and Irma Olguin Jr were fired. Soberal was instrumental in expanding Bitwise beyond Fresno, leading the effort to secure venture funding from venture firms such as Kapor Capital (led by Lotus software founder Mitchell Kapor) that helped transform them into national players. But the details surrounding what went wrong at Bitwise have only just begun to unfold. Last week, management informed employees that it could no longer pay its bills and some local officials were left perplexed when news of furloughs reached them - leaving many searching for answers as to what went wrong at Bitwise. One such question pertains to Bitwise's real estate business, in which they purchase and renovate buildings to serve as tech hubs. With multiple properties located throughout California and Toledo Ohio as potential locations, they were investigating opening one there as well. They had even signed a lease with Toledo officials for space at Jefferson Center - once known for housing a Fresno brewery. Soberal was responsible for leading vision casting for Bitwise's technology and real estate development goals in its future vision casting session. A graduate of Clovis High School, Soberal practiced intellectual property law at Walter & Wilhelm in Fresno before co-founding Bitwise with Olguin. Soberal and Olguin stressed during their pitch process to potential investors that Bitwise wasn't just another software developer; rather it offered training programs, had its own development company, and operated real estate assets - something particularly appealing to local officials in Fresno who have embarked on an ambitious program to bring high-profile Silicon Valley companies like Bitwise into town, and some local elected leaders had worked closely with Bitwise during its early days. Fresno City Council member Brian Clark says he plans to request that Bitwise end its contract until their current situation has been addressed. Clark notes that under state law, 60-day advance warning of mass layoffs must be provided prior to them occurring. He believes Bitwise may have pledged some of their properties as collateral for loans or listed them for sale without proper legal authority, resulting in delinquency with taxes and rent payments on some properties owned by them. He expresses concerns that such practices could put others at risk. Legal counsel for Fresno City Hall has prepared to file a lawsuit in order to defend its interests, although whether Bitwise can afford such legal expenses remains unknown; Fresno's insurance provider has declined to defend them in such a lawsuit.