FRESNO, Calif. (KFSN) -- Newly uncovered legal documents show more legal trouble for Bitwise.
Late last month, Bitwise was in a cash crunch, unable to make payroll.
Court documents first discovered by GV Wire shed light on what may have led to the dire financial situation of a loan the company took out which it planned to repay with its tax refund check.
During the pandemic, the federal government approved the "Employee Retention Credit", a $26,000 payment to companies for every employee they retained in 2020 and 2021.
Once employers filed for the credits, it could take the IRS months or even a year to process the claim and issue the check because of that, a loan market sprung up.
Investors would agree to give companies a portion of that credit immediately in exchange for a fee. When companies get their money from the IRS, they repay the investor.
In October and November 2022, Bitwise sold its $6.1 million in tax credits to an investor, 1861 Acquisition.
Bitwise CEO Jake Soberal agreed to be the guarantor on the loan.
In late December, 1861 Acquisition's loan servicing company saw that the IRS was preparing to issue the credits and mailed out a letter to Bitwise on December 23 reminding them that the money was not theirs to deposit.
IRS records show they mailed out three checks to Bitwise on December 27, 2022, and the company deposited them into their bank account on January 3rd a violation of their contract with 1861 Acquisition.
That same day, Soberal emailed the loan company to tell them that Bitwise didn't have the checks and confirmed they would send them along when they arrived.
Soberal would tell the loan company the same thing eight more times that month.
Under the loan agreement, the investment company had the right to ask the IRS about the checks.
In mid-March, the agency sent a letter showing that the checks had been deposited with a stamp from Bitwise on the back.
When the loan company emailed Soberal, he said the deposit was "news to him."
In calls and emails with Soberal over the next week, the loan servicer demanded payment of the money, but it was never made.
The investor filed a lawsuit against Bitwise on April 4th, and a judge froze Bitwise's bank accounts on April 11th.
A settlement was reached on April 25th, with Bitwise promising to pay back the $6 million it owed, plus nearly $200,000 in interest.
ABC30 reached out to attorneys representing both Bitwise and 1861 Acquisition for a statement but had yet to hear back at the time of publication.