When Bitwise Industries collapsed, it took down hundreds of workers from across the nation with it.
Several employees of the late Fresno-based tech company saw their last few paychecks bounce before learning of across-the-board furloughs in May and layoffs in early June.
Eight months later, many workers wonder if they’ll ever see that money – or their 401(k) contributions – again.
“We just want to know, when are we going to get our money?” said Andre Nunn, the former director of operations at Bitwise’s office in Buffalo, New York. “Who cares about that 401(k) matching. What about either the money that we literally put in hours for, or money that we had in our 401(k) already?”
Experts say the answer to that depends largely on what happens in the U.S. District bankruptcy court, where Bitwise filed a Chapter 7 bankruptcy petition June 28.
“There is no way of getting around the bankruptcy,” said Baldwin Moy, an attorney with the California Rural Legal Assistance.
Though there are many creditors seeking payment through the bankruptcy proceedings, Moy said employees’ wage claims are “near the top.”
Despite that, a likely yearslong process is ahead, experts say – which has put many workers in a difficult position.
“We all need to pay rent this month,” said Esteban Solis Loya, who was a student success specialist at Bitwise’s Fresno office.
“Sure, it would be nice if we were to get the money in two years, but it doesn’t really do much for us right now.”
As former Bitwise workers remain in limbo, other issues that were once straightforward, like obtaining a W-2 form, have turned into headaches.
Who gets paid first after a company collapses in bankruptcy?
When Bitwise filed for Chapter 7 bankruptcy in Delaware, that gave anyone owed money by the company the chance to file a proof of claim with the court.
The deadline to file a proof of claim was Nov. 6, the bankruptcy trustee’s office confirmed.
The U.S. bankruptcy code establishes an order of priority in which creditors get paid once the company’s assets are liquidated.
While employees’ unpaid wages and benefits don’t come first in line, they’re not last, either.
The first to get paid are the “secured creditors,” or creditors who have collateral on the assets they lent Bitwise. An example would be a bank that has collateral against a loan they’ve given a company.
After that comes administrative fees which include court costs as well as pay for lawyers, accountants, and the trustee of the bankruptcy estate, according to bankruptcy attorney Riley Walter.
Then comes the “unsecured priority claims,” in which there are 15 different ranked categories, Walter said, including unpaid employee wages.
That puts employees ahead of both trade creditors – who supply a company with some kind of good or service – and investors, who are last in line.
“In Bitwise, it’s pretty clear that the trade creditors are going to get very, very, very little,” Walter said. “So there’s not going to be anything for investors.”
‘Of course, I still want my money’
In addition to filing claims with bankruptcy court, some former Bitwise workers opted to join lawsuits.
One filed in Fresno County Superior Court accuses Bitwise of violating the WARN Act. The law requires that employers give workers 60-day notice before mass layoffs.
Nunn, formerly of Bitwise’s Buffalo office, is a plaintiff in another lawsuit filed in federal court in Fresno.
These and other civil cases are on hold for the time being, however, resulting from an automatic stay that went into effect once Bitwise filed for bankruptcy.
The stay helps ensure creditors who are “similarly situated” get the same payout through bankruptcy court, Riley said.
“Otherwise, more aggressive creditors could pursue recoveries on civil suits,” he said, “to the detriment of other people.”
Aside from that, ex-employees can also file wage claims with the California Labor Commissioner’s Office.
These claims are also paused while the stay is in effect, Department of Industrial Relations spokesperson Charles Hamilton confirmed.
Of all these avenues, Moy said bankruptcy court will likely be the quickest path to regaining lost wages for ex-employees. It also doesn’t require employees to promise attorneys a cut of whatever they may secure through litigation.
“Let’s say you get back $10,000, and you agree to 30%,” with an attorney, he said. “Even though those are your wages that you lost, he takes $3,000. I don’t think that’s worth it.”
“It’s not going to get you any relief any quicker,” he added.
Walter said he would bet it’s “at least a year and a half” before any money gets distributed in the Bitwise bankruptcy case.
Not all ex-Bitwise workers opted into these processes, however. Solis Loya, who was hired by Bitwise in April 2022, said his last few checks bounced and he hasn’t been able to access his 401(k) for months.
He spoke with a law firm representing ex-employees last year, but ultimately decided against taking action.
“I kept hearing from everyone, ‘What’s lost is lost,’” he said. “I don’t know if they’re gonna be able to recover those wages because they declared bankruptcy. I was just like, I don’t want to go through this process. I’m kind of over it.”
He’s still looking for full-time work eight months later. But he said when he threw in the towel on trying to get his money back, that’s when he really started applying to new jobs in earnest.
“I just had to accept it,” he said. “Of course, I still want my money. But I understand that it’s probably gone, and it is what it is. It’s not necessarily fair, but it’s just an opportunity for me to figure things out and see what comes next.”
Ex-Bitwise workers won’t get W-2 forms for 2023
Nunn said it’s been months since he’s heard from any top level Bitwise executive, including board members.
That leaves him and other laid-off Bitwise workers feeling in the dark on a number of matters, including how they’ll obtain W-2 form to file his taxes in the coming months.
The Bitwise case’s bankruptcy trustee, Jeoffrey Burtch, has taken over “all corporate duties and responsibilities for Bitwise,” according to attorney Carrie Francis. She’s representing Bitwise board members Ollen Douglass and Joseph Proietti in their lawsuit against Bitwise’s former CEOs Jake Soberal and Irma Olguin.
But the bankruptcy estate won’t be sending out W-2s, a representative from Burtch’s office told Fresnoland.
Instead, workers should use IRS form 4852 “or consult their personal accountants.”
The form 4852 is a substitute for a normal W-2 issued when an employer either issues an incorrect W-2 or fails to send one altogether, according to the Internal Revenue Service.
This article first appeared on Fresnoland and is republished here under a Creative Commons license.