Business

Bounced paychecks, frozen 401(k)s — How Fresno’s ‘shining star’ let down the people it aimed to serve

Published

2 years ago

June 14, 2023

Press Room

Bounced paychecks, frozen 401(k)s — How Fresno’s ‘shining star’ let down the people it aimed to serve

In retrospect, the signs that trouble was brewing for Bitwise Industries had been piling up for months.

Lawsuits. Bounced paychecks. Missed property tax payments.

But for the last decade, the Fresno company had been selling a powerful dream to cities across the Central Valley and the country — places that had been left behind in the digital transformation of the economy. Bitwise offered workforce training to the underserved, software services, and co-working spaces to revitalize downtowns. City officials and community members rallied behind the business. Gov. Gavin Newsom even thanked the company for its services during the pandemic.

That dream was abruptly shattered when Bitwise furloughed all 900 of its employees on Memorial Day evening, as first reported by the Fresno Bee and Bakersfield Californian, with no answers from any of its leaders ever since.

“We are facilitating here a fairly significant transition of our regional economy [and] we felt like they were going to serve a critical role,” said Kern County chief administrative officer Ryan Alsop. “They were a bright and shining star.”

Bitwise’s board of directors has since fired co-CEOs and co-founders Irma Olguin Jr. and Jake Soberal and hired Ollen Douglass, CEO of consulting firm Hanover Street Advisors, as interim president, the board said in a news release June 3. Meanwhile, former employees are pursuing legal action over missed paychecks and alleged labor violations.

“The Board of Directors was recently made aware of the company’s cash deficit by management and took immediate action as a result,” Douglass said in the release. “We are committed to determining the root cause and will continue to take swift action.”

Much remains to be untangled in the story of how the company imploded, but this much is clear: Bitwise was not a mere casualty of a slowing economy, as has been the case with so much of the tech industry that has suffered waves of layoffs. City officials and employees instead paint a picture of a decade-old beloved community institution of underdogs — one that seemingly disappeared overnight.

‘Insufficient funds’

In April, Olguin and Soberal sent an email out to employees announcing that payroll would be transitioning from direct deposit to paper checks.

“Your anxiety may be trying to tell you, ‘OMG the business is failing, we’re out of money.’ No. That’s not what this is about. We’re literally trying to make your lives simpler and remove uncertainty,” the email shared with The Times said.

And the preceding months of payroll issues? The co-CEOs wrote that those were due to everything from “bank failures to delivery problems to software glitches to literal natural disasters.”

The move to paper checks, they explained, was so the company could transition from small community banks to “larger, brand name banks where the size and complexity of our company can be better served.”

Multiple employees reported that their paychecks, which came from First Republic Bank, started bouncing in April, with one employee’s bank rejecting the check due to “insufficient funds” a week after the deposit was made.

After the switch to paper checks, 401(k) contributions also started to go missing.

Bitwise co-CEOs Jake Soberal and Irma Olguin Jr., right.

(Fresno Bee)

Again, Olguin and Soberal addressed employees in an email late May, saying the company had been “carefully tracking all 401K contributions manually since our switch from direct deposit,” and they were working on transferring contributions and company matches from their bank to John Hancock — their retirement account provider — in “partial deposits.”

Employees recalled Olguin and Soberal continually reassuring them that the company was doing fine and that many startups weren’t profitable. In one all-staff meeting, however, that left some of them unsettled, Soberal joked that he’d have to “fire like 15 of you guys to make payroll.”

“There were so many assurances of everything was fine,” said a former Bitwise director, who withheld her name because the company still owed her money. “If you questioned anything, you didn’t believe in the company and you kinda got iced out.”

That unease gave way to real panic around 8 p.m. Memorial Day, when Soberal sent an email informing workers of an “URGENT” all-staff call. By the end of that call, all 900 of Bitwise’s employees had lost their jobs in what the CEOs called a furlough.

Soberal told the Fresno Bee late May 29 that the furloughs were expected to be “a very temporary action” and that it was the result of “several critical [financial] transactions [that] either did not materialize or materialized unfavorably.”

“The events that we’re dealing with that led to furloughs of the team were very new and very unexpected,” Soberal told the Bee.

Some were initially hopeful they would eventually return to work, sending messages of encouragement to Soberal and Olguin on a companywide email thread. But since then, several employees have reported that their last two paychecks — covering three weeks of work — haven’t cleared. Those desperate to make ends meet have been unable to withdraw or borrow from their 401(k) accounts. Healthcare benefits have been terminated, with little information so far on how to apply for COBRA insurance.

On June 2, the landlord for Bitwise’s three Fresno buildings was preparing to evict its errant tenant.

“The rent on this property has been due and unpaid for over sixty two consecutive days and the landlord believes you have abandoned the property,” read notices posted on the buildings, the Fresno Bee reported.

Olguin and Soberal did not respond to requests for comment.

A view down an interior of a building hall with color lines on the ground and shops-like spaces lining both sides.

Christopher Ramos and his husband both worked for Bitwise, as well as his mother who was just hired in January after leaving her job of 10 years. On June 1, Ramos, who runs the Instagram account Vintage Fresno, explained the situation and asked for help.

“We wanted to work at Bitwise as a family until we all retired and believed in the work Bitwise was doing in the world,” Ramos wrote. “We can’t pay any of our bills and are left without answers.”

Since the company’s implosion, Fresno and Kern County officials have hosted resource and job fairs for former Bitwise employees with employers in need of tech-savvy hires.

Former employees also are pursuing a class-action lawsuit against Bitwise for violating the California Worker Adjustment and Retraining Notification Act, which requires adequate notice for mass layoffs or furloughs, as well as wage theft and numerous other labor code violations.

Olguin and Soberal have stated under oath that they had $80 million in their Central Valley Bank account as of March 9 of this year, the lawsuit said. The company had announced the previous month an $80-million funding round from investors including Kapor Center, Motley Fool Ventures, and Goldman Sachs, that was supposed to fuel their expansion to Chicago’s South Side.

“It begs the question, what do you do with $80 million in three months?” said Roger Bonakdar, an attorney with Bonakdar Law Firm in Fresno who’s representing the plaintiffs. “If they in fact had $80 million in March, they should have taken that money and earmarked it for the staff first to make sure they could have carried that payroll and benefit expense.”

Right after the furloughs, Soberal told investors “Bitwise is done” and admitted he was concerned about employee labor claims and liability, the lawsuit said.

The legal action names Olguin and Soberal as well as the members of the Bitwise board, which includes interim president Douglass.

“It is flatly impossible that the board did not know and did not contemplate the imminent and catastrophic consequences for all of these employees,” Bonakdar said.

Legal "notices of belief of abandonment" sign is taped to a glass of a building

Another class-action lawsuit was filed with lead plaintiffs including employees in New York and Maine in the Eastern District of California.

Douglass and the board did not respond to requests for comment. The only communication employees have received from him is a notice Tuesday to preserve company documents and records — indicating the company may be gearing up for a legal fight.

‘People really believed in Bitwise’

Despite receiving millions of dollars from investors and garnering enviable coverage in major news outlets, Bitwise’s operations — and how exactly it made revenue — may be puzzling to outside observers. That might be due to the sheer number of lines of business the company was juggling.

Bitwise began in 2013 as Geekwise Academy, a coding bootcamp based in Fresno, that initially targeted underserved populations such as veterans and the formerly incarcerated. Over the years, it acquired several buildings in Fresno, hosting local businesses and opening co-working spaces in California, Texas, and Ohio. There was also a software development arm, which employed many of its own former trainees. Bitwise raised a $27-million Series A round of funding in 2019 and Series B funding of $50 million in 2021.

The company also began to land hundreds of thousands of dollars in public funding through contracts with locales such as the city of Bakersfield and Kern County to operate a job training center as well as an accelerator for aspiring entrepreneurs.

During the pandemic, Bitwise launched the OnwardCA website to help match out-of-work Californians with jobs, an effort that received a shout-out from Newsom.

More recently in February, Fresno committed $1 million in American Rescue Plan Act funding to Bitwise to launch a Digital Empowerment Center for helping small businesses acquire digital tools and skills such as social media strategies, Salesforce software and search engine optimization.

Fresno Mayor Jerry Dyer said the city paid $500,000 and held back the other half until proof of performance. The city verified $120,000 worth of services provided two months ago but has no proof for the rest.

“I’m certain there are people today that will say, ‘I knew that they were snake oil salesmen,’” Dyer said. “But the truth is, I had not really heard that. I heard from a lot of folks, elected officials, business community, investors, people really believed in Bitwise.”

‘This truly was the best place I have ever worked’

Former employees paint a picture of a Utopian work environment where co-workers believed wholeheartedly in Bitwise’s mission — making the company’s abrupt downfall feel all the more like a betrayal.

One employee who joined in March 2021 said it was hard for her and her colleagues looking for jobs because they know they’ll never find another place like Bitwise.

“The most heartbreaking piece of it is this truly was the best place I have ever worked,” she said, asking that her name be withheld because the company still owed her money. “Every single person that worked at this community was a generally amazingly kind human being.”

An three-quater exterior frame of a two-story building with "Bitwise Industries" sign near the roof, above main the door.

Like many others, she was shocked by the news — especially since Bitwise had just announced its $80-million funding round in February.

Another employee, who also requested anonymity as she had not received her last few paychecks, cited Bitwise‘s success in creating a place of “diversity and inclusion” that made everyone feel welcome. The company is composed of 50% Black, brown or Native employees, 50% LGBTQ women, nonbinary, gender nonconforming, trans individuals, and 20% first-generation immigrant employees, according to its website.

“I can’t put into words… how betrayed I feel as a former employee,” she said. “It’s almost like the company disappeared overnight and they wiped everything.”

Untangling a complicated web

Bitwise faced plenty of other legal issues before recent events that indicated the company may have been in bad financial straits.

A Texas company sued Bitwise a day after the furloughs alleging the company had illegally borrowed almost $30 million using Bitwise buildings as collateral, and illegally listed several of those properties for sale, the Fresno Bee reported. Before that, Bitwise settled a suit alleging the company had not paid rent, utilities, taxes, and other expenses on several properties. In yet another suit, the company was accused of mishandling refund checks from the U.S. Internal Revenue Service that were owed to another entity — it cost Bitwise almost $6.4 million to settle.

Shortly after the furloughs, Dyer revealed the company had not been paying city business taxes since September 2021.

“We’re going to pursue that through legal means,” Dyer said of any money Bitwise owed to the city. “But I imagine we’ll be in a long line of people pursuing their losses as well, including investors that have lost tens of millions of dollars, not to mention the employees.”

Business

China’s Population Declines for 3rd Straight Year

Published

41 minutes ago

January 17, 2025

Press Room

China’s Population Declines for 3rd Straight Year

To get its citizens to have more children and stop its population from shrinking, China has tried it all, even declaring having babies an act of patriotism. And yet, for the third year in a row, its population got smaller.

Not even a surprise uptick in the number of babies born, a first in seven years, could reverse the course of an aging and declining population.

China is staring down a longer term baby bust that is rippling through the economy. Hospitals are shutting their obstetrics units, and companies that sold baby formula are idling factories. Thousands of kindergartens have closed and more than 170,000 preschool teachers lost their jobs in 2023.

The country’s birthrate, as one former kindergarten in the southern city of Chongqing put it, “is falling off a cliff.” Enrollments in China’s kindergartens plummeted by more than five million in 2023, according to the most recently available data.

On Friday, the National Bureau of Statistics reported that 9.54 million babies were born last year, up slightly from 9.02 million in 2023. Taken together with the number of people who died over 2024 — 10.93 million — China’s population shrank for a third straight year.

The small bump in newborns, in part because it was the auspicious Year of the Dragon in the Chinese zodiac, didn’t change the broader trajectory, experts said. China’s childbearing population is declining and young people are reluctant to have children.

“In the medium and long term, the annual number of births in my country will continue to decline,” said Ren Yuan, a professor at Fudan University’s Institute of Population Studies.

The lack of babies is adding to China’s economic challenges. A shrinking working-age population is straining an underfunded pension system, and an aging society is leaning on a creaking health care system. China also reported on Friday that the economy grew by 5 percent in 2024, a number that was in line with expectations but that many experts said did not fully reflect a crisis of confidence among households reeling from a multiyear property crisis.

To encourage people to have more babies, the authorities are offering tax benefits, cheaper housing and cash. Cities are promising to cover the cost of in vitro fertilization. In some parts of the country, they are even promising to get rid of restrictions that penalize single mothers.

The government has called on local officials to put in place early-warning systems to monitor big changes in population at the village and town levels around the country. Some officials are even knocking on doors and calling women to inquire about their menstrual cycles.

Companies are also getting involved. In 2023, the travel site Trip.com started paying employees nearly $1,400 a year for each newborn until the age of 5. Last week, the founder of electric vehicle maker XPeng said he would give employees nearly $4,100 if they had a third child.

“We want our employees to have more kids,” said He Xiaopeng, the founder, in a video posted on social media. “I think the company should take care of the money, so employees can have children.”

The problem is not unique to China, which in 2023 was passed by India as the world’s most populous nation. Falling birthrates are often a measure of a country’s move up the economic ladder because fertility rates tend to fall as incomes and education levels go up. But China’s sudden decline in population arrived much sooner than the government had expected. Many families are earning more money than they were a decade ago, but have lost income because of the housing crisis.

Officials have long feared the day when there will not be enough workers to support retirees. Now the government has less time to prepare. More than 400 million people will be 60 or older in the next decade.

China is facing two challenges on this front. Its public pension system is severely underfunded and many young people are reluctant — or are unable — to contribute. A low retirement age has made things worse. After years of deliberation, the government decided on a 15-year plan to gradually increase the official age to 63 for men, 58 for women in office jobs and 55 for women who work in factories. The changes took effect this month.

The party only loosened birth restrictions in 2015 to allow families to have two children, an easing that created a sudden boom. Hospitals had to add beds in the corridors because there weren’t enough.

But the moment was short-lived. By 2017, births started declining every year until last year.

In 2021, panicked officials loosened China’s birth policy again, allowing couples to have three children. It was too late. The next year, so few babies were born that the population began to shrink for the first time since the Great Leap Forward, Mao Zedong’s failed experiment that resulted in widespread famine and death in the 1960s.

China has one of the lowest fertility rates in the world, far below what demographers refer to as the replacement rate required for a population to grow. This threshold requires every couple, on average, to have two children.

Experts said the number of births would likely continue to fluctuate.

“For a country of 1.4 billion a half million more births is not much of a rebound at all,” Wang Feng, a professor of sociology at the University of California, Irvine. “This is in comparison to the lowest year, in 2023 when the pandemic certainly put a pause on childbearing.”

Many young Chinese people are quick to rattle off reasons not to have children: the rising cost of education, growing burdens of taking care of their aging parents and a desire to live a lifestyle known as “Double Income, No Kids.”

For women, the sentiment is especially strong. Daughters who were the only children in their families received education and employment opportunities their parents often did not. They have grown up to become empowered women who see Mr. Xi’s appeals to them to do their patriotic duty and bear children as one step too far. Many of these women have said that deep-seated inequality and insufficient legal protections have made them reluctant to get married.

The steep drop in babies is having a drastic effect on health care, education and even the consumer market. Companies that once minted money selling baby formula to feed a baby boom are now making shakes with calcium and selenium for older adults with brittle bones.

Nestlé, the world’s largest food company, is shutting a factory for the China market that employs more than 500 people halfway across the world in Europe. The company will focus on selling premium baby products and expanding its offering in adult nutrition in China, a spokesman said.

The pressure on China’s health care system is even more pronounced. Dozens of hospitals and maternal health clinic chains have reported closing over the past two years.

On social media forums, nurses specializing in obstetrics have talked about low pay and lost jobs. One doctor told state media that being in obstetrics, once considered an “iron rice bowl” position with guaranteed job security, had become a “rusty iron rice bowl.”

And some smaller hospitals have stopped paying their staff, Han Zhonghou, a former official at a hospital in northern China, told a Chinese magazine.

“Life for maternal and child hospitals,” Mr. Han said, “is getting harder and harder by the year.”

Business

FTC refers Snap complaint alleging its chatbot harms young users

Published

2 hours ago

January 16, 2025

Press Room

FTC refers Snap complaint alleging its chatbot harms young users

The Federal Trade Commission on Thursday announced it had referred a complaint against Snap Inc. to the Department of Justice, alleging the social media company’s AI-powered chatbot is harmful to young users.

The complaint isn’t public, but the commission made the unusual move of announcing its referral because it determined it’s in the public interest. Two of the commissioners released statements saying they were opposed to the commission’s decision, which was made behind closed doors. One of the commissioners, Andrew N. Ferguson, called the vote “farcical.”

“I did not participate in the farcical closed meeting at which this matter was approved, but I write to note my opposition to this complaint against Snap,” he said in a statement.

Ferguson said he couldn’t elaborate on his opposition because the complaint isn’t public.

The referral signals the federal government has child safety concerns surrounding AI chatbots that can generate text and images. The Santa Monica-based company released a chatbot called My AI that runs on OpenAI’s technology in 2023 that can recommend what to watch, suggest a dinner recipe, help plan a trip or do other tasks.

Ferguson, a Republican who President-elect Donald Trump tapped to lead the FTC, said in his statement the complaint against Snap had “many problems” and clashed with the 1st Amendment.

A Snap spokesperson said in a statement that the company has “rigorous safety and privacy processes” and the product “is also transparent and clear about its capabilities and limitations.”

“Unfortunately, on the last day of this Administration, a divided FTC decided to vote out a proposed complaint that does not consider any of these efforts, is based on inaccuracies, and lacks concrete evidence,” the statement said. “It also fails to identify any tangible harm and is subject to serious First Amendment concerns.”

The FTC declined to share the complaint, noting it’s not public at the moment.

Snap has faced concerns about child safety before, including over the use of its app by teens to purchase deadly fentanyl-laced pills.

About 443 million people on average use Snapchat every day and the service is popular among teens.

Business

Trump Is Said to Consider Executive Order to Circumvent TikTok Ban

Published

8 hours ago

January 16, 2025

Press Room

Trump Is Said to Consider Executive Order to Circumvent TikTok Ban

President-elect Donald J. Trump is considering an executive order to allow TikTok to continue operating despite a pending legal ban until new owners are found, according to a person with knowledge of the matter.

The possible executive order, reported earlier by The Washington Post, is under discussion as TikTok faces a deadline on Sunday to be banned in the United States unless it finds a new owner. The popular video-sharing app is owned by ByteDance, a Chinese company. Republicans have said for years that they see the app, which has been downloaded to millions of smartphones, as a national security risk. It has become a rare issue that has united both parties in Congress.

If the Supreme Court upholds the law, which will ban the app unless ByteDance sells it to a non-Chinese company, special treatment from Mr. Trump might be the only way for TikTok to continue operating in the United States in the near term. The law requires app store operators like Apple and Google and cloud computing providers to stop distributing TikTok in the United States.

An executive order could try to direct the government not to enforce the law or to delay enforcement to complete a deal, a move that past presidents have used to challenge laws. It is unclear if an executive order would survive legal challenges or persuade the app stores and cloud computing companies to take steps that could expose them to huge penalties.

Alan Z. Rozenshtein, a former national security adviser to the Justice Department and a professor at the University of Minnesota Law School, said an executive order should be “taken with a medium-sized boulder of salt.” Such an order is not a law, he said, and legally would not change the legislation passed by Congress and signed by President Biden.

While there is some speculation that the app will still work if it has already been downloaded, the law also affects internet hosting companies like Oracle and other cloud computing providers, and it is unclear how video load times and the functionality of the app may respond.

One person close to Mr. Trump’s team said some of his allies had loose discussions about buying TikTok but provided no details. Mr. Biden, whose term ends on Monday, a day after the ban is set to go into effect, is also under pressure to find a way to save the app.

The New York Times reported late Wednesday that TikTok’s chief executive, Shou Chew, is expected to attend Mr. Trump’s inauguration on Monday and was offered a seat on the dais. TikTok declined to comment.

Mr. Chew is expected to be joined by other tech executives on the dais: Mark Zuckerberg, the co-founder of Meta; Jeff Bezos, the Amazon founder; Elon Musk, Mr. Trump’s megadonor; and Tim Cook, the chief executive of Apple, who personally donated $1 million to the inaugural committee.

Mr. Trump had previously backed a TikTok ban but publicly changed his stance last year, soon after meeting with Jeff Yass, a Republican megadonor who owns a large share of ByteDance.

Mr. Trump has said they did not discuss the company. But Mr. Yass helped found the trading firm Susquehanna International Group and is one of the biggest supporters of the conservative lobbying group Club for Growth. The group has hired people with ties to Mr. Trump, such as Kellyanne Conway, his former top adviser, and the Republican adviser David Urban, to lobby for TikTok in Washington.

TikTok has also worked to make inroads with the Trump team through Tony Sayegh, who was a Treasury official during Mr. Trump’s first administration and now leads public affairs for Susquehanna.

Mr. Sayegh has relationships with the Trump family and was a core part of the campaign’s decision to join TikTok this summer. Several members of the family, including Ivanka Trump, Donald Trump Jr. and Kai Trump, the president-elect’s granddaughter, have also joined the app.

Mr. Trump’s interest in TikTok is not entirely because of his advisers. He came to see how well videos about him performed on the platform, and his advisers credited it with helping him to expand his reach to a new type of voter during the campaign.

Any actions Mr. Trump might be able to take on TikTok are complicated. The law gives the president the ability to extend the deadline for a sale only if there is “significant progress” toward a deal that would put the company in the hands of a non-Chinese owner.

It also requires that the deal be possible to complete within 90 days of an extension. It is unclear exactly how an extension will work if Mr. Trump tries to deploy it after the ban takes effect.

TikTok has maintained throughout its court challenge to the law that such a sale is unworkable in part because of the prescribed time frame. A group led by the billionaire Frank McCourt has mounted a bid to buy the app — though without its mighty algorithm — in recent months.

Mr. Trump could also try to work around the law by instructing the government not to enforce it.

But app store operators and cloud computing providers could require more than a soft assurance from Mr. Trump that he will not punish them if they fail to execute the ban, said Ryan Calo, a professor at the University of Washington School of Law. The potential legal liability for companies that violate the law is significant: Penalties are as high as $5,000 per person who is able to use TikTok once the ban is in effect.

“You could have a policy not to enforce this ban,” said Mr. Calo, who was part of a group of professors who urged the Supreme Court to overturn the TikTok law. “But I think that maybe conservative companies would just be like: ‘OK, you’re not going to enforce it. But it is on the books, and you could enforce at any time.’”

Mr. Trump’s pick for attorney general, Pam Bondi, has declined to say whether she would enforce the law.

“I can’t discuss pending litigation,” she said at her Senate confirmation hearing on Wednesday. “But I will talk to all the career prosecutors who are handling the case.”

Mr. Trump has a third option: appealing to Congress to reverse a policy it overwhelmingly approved with broad bipartisan support last year.

“Congress can undo this anytime,” Mr. Calo said.

On Thursday, Senator Chuck Schumer of New York, the Democratic leader, said on the Senate floor that he was worried about the possibility of a ban on TikTok.

“It’s clear that more time is needed to find an American buyer and not disrupt the lives and livelihoods of millions of Americans, of so many influencers who have built up a good network of followers,” he said. He added that he had also made those views clear to the Biden administration and accused Republicans of blocking a bill that would have extended the deadline for a ban by 270 days.

A White House official said on Thursday that the administration’s clear view was that TikTok should operate with an American owner. Because of the timing of the potential ban — taking place over a holiday weekend before the inauguration — it would fall to the next administration to carry out the law, the official said.

Catie Edmondson contributed reporting.