Greenwich Man Sentenced For Defrauding Investors Of A Now-Failed Startup: Feds

GREENWICH, CT — A Greenwich man was sentenced Tuesday by a U.S. District Judge to three years and five months in prison for defrauding investors in loans made to the failed Fresno, Calif.-based startup Bitwise Industries, according to a news release from the U.S. Attorney's Office, Eastern District of California.

Andrew Adler, 31, received the sentenced from U.S. District Judge Jennifer L. Thurston, who ordered Adler to pay $9.3 million in restitution jointly and severally with the Bitwise defendants and to forfeit another $1 million.

"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 in a news release. "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 through May 2023, Adler and his business partner, David Hardcastle, 61, of Fresno, gave Bitwise approximately $20 million in hard money loans, federal officials said.

They did not fund the loans themselves or otherwise put their own money at risk, but instead syndicated the loans to other investors, officials said. In doing so, officials said the men altered the original loan documents to make it appear that Bitwise was paying a significantly lower interest rate for the loans than was true

The men also forged the signature of one of Bitwise’s co-CEOs on the altered documents, officials said. The tactic made the loans appear less risky and more appealing to investors, officials said, explaining that 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 the company.

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 that they controlled, officials said.

Generally speaking, officials said, 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.

Secure interest reserves are not supposed to be used for the personal benefit of the loan originators, officials said.

Adler and Hardcastle also made tens of thousands of dollars in fees for originating the loans, according to officials, and they stood to make millions more in secret profits from the higher, undisclosed interest rates had the loans been fully repaid.

However, Bitwise turned out to be a "Ponzi-like fraud scheme" and collapsed before that could happen, officials said. As a result, the participants lost nearly all their money.

Officials pointed out that Adler told the court in his filings that he was motived 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, according to officials.

Bitwise’s CEOs Jake Soberal and Irma Olguin Jr., were previously sentenced to 11 years and nine years in prison, respectively, for the carrying out the Bitwise Ponzi scheme that caused a loss of over $115 million in that case, officials noted.