Bankrupt Bitwise companies owe creditors at least $511 million – not counting unpaid wages
As the fallout continued from the financial demise of Fresno-based Bitwise Industries, its parent company BW Industries Inc. was just one of five related entities to file for Chapter 7 bankruptcy in Delaware this past week.
Each of the companies – BW Industries Inc., Bitwise Industries Inc., Alpha Works Technologies LLC, BWRD LLC and Bruce’s Bagels, Beverages & Bites LLC – has its own set of court filings that illustrate the complex and tangled financial relationships among them.
The court documents reveal that collectively, the five companies owe a total of more than $511 million to creditors. But the actual figure could be even higher, as many of the 886 claims by employees for unpaid wages are listed with “undetermined” amounts owed, while others are being disputed by the companies.
The Chapter 7 filings in the federal bankruptcy court in Delaware, where BW Industries is incorporated, set the stage for the eventual liquidation of each company’s assets to satisfy what their debt. The companies’ court filings show an estimated $441.9 million in assets for the five companies.
Bitwise was founded in 2013 as a hub for training students in software coding and website design, technology services for local companies, and providing leased space to budding technology entrepreneurs and other businesses. From those beginnings, the company embarked on a program of expanding its geographic footprint across California and, in recent years, to out-of-state communities in Colorado, Illinois, New Mexico, New York, Ohio and Texas.
Along the way, the network of related entities was established by former co-CEOs Jake Soberal and Irma Olguin Jr., each responsible for different aspects of operations – and each with its own employees, bank accounts, and, now, their own sets of creditors and assets to be liquidated to satisfy those claims.
Complicating an analysis of what will be available to repay creditors in the wake of the bankruptcies is what interim Bitwise Industries president Ollen Douglass – who is also a member of the company’s board of directors – described in court filings as the apparent disarray in the books for all of the various Bitwise entities.
Douglass reported to the court that an internal analysis of the company’s finances since May 28 revealed that the “books and records of the Company are substandard and materially incomplete” because of “substantial irregularities” in Bitwise’s accounting practices.
“The lack of organized and well-kept books and records, as well as obstacles resulting from an inability to access and verify certain financial information such as bank accounts, has hindered the Company’s ability” to make a true estimation of the amounts owed to some creditors, Douglass said.
Additionally, many of the assets claimed by Bitwise and the associated companies are noted as “intercompany receivables” – money owed by one company to another. That could throw into question the true total of property and assets that can be liquidated to satisfy creditors’ claims.
Also, the various companies are claiming leases on buildings as assets. In Fresno, however, building owner Baltara Enterprises LP has taken steps to evict Bitwise from the three buildings that it owns in downtown Fresno, including the Bitwise South Stadium headquarters on Van Ness Avenue as well as the Bitwise 41 and Bitwise Hive buildings on Ventura Street.
A fourth downtown Fresno building, the former State Center Warehouse buildling on R Street between Tulare and Ventura streets, is the subject of a lawsuit by a Texas company that claims a 95% majority ownership stake of the property. The company, NICbyte LLC, alleges that it also has 95% ownership of other Bitwise buildings in Bakersfield and Oakland.
A summary of the assets and liabilities listed in bankruptcy court documents for each of the companies includes:
- BW Industries Inc.: Determined assets of about $253.6 million, against determined liabilities of about $198.4 million. Those liabilities include more than $21 million in claims secured by property or assets; no priority unsecured claims; and almost $168 million in unsecured, non-priority claims.
- Bitwise Industries Inc.: Total determined assets of $175.5 million, against $252 million in determined liabilities. Those liabilities include secured claims of $12.7 million; $87,760 in priority unsecured claims; and more than $239.2 million in unsecured, non-priority claims. Among the priority unsecured claims are 769 from employees for unpaid wages, many of which have amounts listed as “undetermined” in the court documents.
- Alpha Works Technologies LLC: Determined assets of about $7.6 million, against liabilities estimated at almost $43.9 million. Liabilities include $6.5 million in secured claims, about $3,300 in unsecured priority claims, and $37.3 million in unsecured, non-priority claims. There are 99 unsecured priority claims from employees for unpaid wages, many of which are listed as undetermined in value.
- BWRD LLC: Total determined assets of about $4.9 million, against liabilities estimated at $25.3 million. About $6.5 million is reported in secured claims, with about $6,500 in unsecured priority claims and about $18.8 million in unsecured non-priority claims. There are two claims for unpaid wages among the priority unsecured claims.
- Bruce’s Bagels, Beverages & Bites LLC: Total determined assets of less than $280,000, against total determined liabilities of just over $886,000. Court records reflect no secured or priority unsecured claims, but there are 16 employee claims for unpaid wages for which values are listed as undetermined.
This story was originally published July 1, 2023 at 5:00 AM.
