A group of investors have filed suit against Central Valley Community Bank, claiming the bank helped the federally indicted heads of Bitwise allegedly carry out a fraud scheme worth $100 million.
The bank enabled Bitwise to "perpetuate massive fraud on Plaintiffs," states the lawsuit, filed in U.S. District Court for Northern District of California.
On Nov. 8, the U.S. Justice Department charged former co-CEOs of Bitwise with fraud.
"They face decades in prison for their fraud on Plaintiffs and many others," the lawsuit states. " But for the Defendant’s assistance, the fraud on Plaintiffs never would have happened. The Bank boasts 'excellence, accountability and integrity' as its 'core values. Far from it," the lawsuit states.
Plaintiffs 1701 18th Street, LLC, 1715 18th Street, LLC, 1723 18th Street, LLC, 747 R Street, LLC, and 1680 14th Street, entered into five Deposit Account Control Agreements (“DACAs”) with the bank and BW Industries, an affiliate under common control with Bitwise, the suit says.
"The DACAs were executed in July 2022 in order to secure Plaintiffs’ interests in an account designated to hold over $6 million that BW Industries was required to maintain for Plaintiffs with Central Valley Community Bank," the lawsuit states.
The bank misled investors about the security of the deposit accounts, telling them that there were no other claims on the funds, according to the lawsuit. In fact, another company, Venture Lending & Leasing IX, Inc. had a security claim on the account.
The lawsuit seeks compensatory and punitive damages, plus legal fees.
The plaintiffs are represented by attorneys Stephen H. Sutro, Suzanne R. Fogarty and Adrian G. Cadoppi, of Duane Morris LLP, of San Francisco.
NICBYTE LLC v. Central Valley Community Bank, U.S. District Court for the Northern District of California, CGC-23-610648