FRESNO, CALIF. – A Greenwich businessman was sentenced to 41 months in prison and ordered to pay $9.3 million in restitution to investors of a failed California tech startup for defrauding them of $20 million, according to Acting U.S. Attorney Michele Beckwith.
Andrew Adler, 31, of Greenwich, was sentenced by U.S. District Judge Jennifer L. Thurston for defrauding investors in loans made to the failed Fresno-based startup Bitwise Industries, a computer programming instruction and technology sales company. He was also ordered to forfeit another $1 million.
He pleaded guilty to the charge of conspiracy to commit wire fraud in February.
Adler could not be reached for comment.
“The collapse of Bitwise Industries exposed Andrew Adler’s lies to investors in securing a multi-million-dollar loan, which he used to secretly line his pockets.” said FBI Sacramento Field Office Special Agent in Charge Sid Patel. “This investigation clearly demonstrates the FBI’s tenacity and is a testament of the great work performed by FBI agents and personnel in our Fresno Resident Agency.”
According to court records, from December 2022-May 2023, Adler and his business partner, David Hardcastle, 61, of Fresno, gave Bitwise approximately $20 million in hard money, or short-term, loans through their special purpose entity Startop Investments LLC. Adler and Hardcastle used a syndicate of investors to fund the loans. In order to mislead the investors, Adler and Hardcastle altered the original loan documents to make it appear as though Bitwise was obligated to pay significantly less interest on the loans than was true. They also forged the signature of Bitwise’s Co-CEO, Jake Soberal, on the altered documents. This made the loans appear less risky and, therefore, more appealing to the investors.
They did not fund the loans themselves or otherwise put their own money at risk. Instead, they syndicated the loans to other investors. In doing so, they altered the original loan documents to make it appear that Bitwise was paying a significantly lower interest rate for the loans than was true. They also forged the signature of one of Bitwise’s Co-CEOs, Jake Soberal, on the altered documents. This made the loans appear less risky and more appealing to the investors.
Several of the investors later told the FBI that they would not have invested in the loans had they known the actual interest rates that Bitwise was paying because that would have been a red flag that something was wrong with Bitwise.
One of the loans included a secure interest reserve of approximately $714,000 that the investors did not know about and that Adler and Hardcastle used to make an unrelated, personal investment in another company they controlled (secure interest reserves are disclosed to loan investors ahead of time and are supposed to help protect the investors in the event that the borrower does not make its payments on schedule). They are not supposed to be used for the personal benefit of the loan originators like Adler and Hardcastle.
The two partners also made tens of thousands of dollars in fees for originating the loans. They stood to make millions more in secret profits from the higher, undisclosed interest rates had the loans been fully repaid. Unfortunately, however, Bitwise turned out to be a Ponzi-like fraud scheme and collapsed before that could happen. As a result, the participants lost nearly all their money. Adler told the court in his filings that he was motivated to commit the fraud by pure greed and nothing else.
Hardcastle has been indicted for his role in the fraud and is currently pending trial.
Bitwise’s CEOs Jake Soberal and Irma Olguin Jr. were previously sentenced to 11 years and nine years in prison, respectively, for carrying out the Bitwise Ponzi scheme that caused a loss of over $115 million in that case.
