NICbyte, LLC v. StarTop Investments, LLC

IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE

NICBYTE LLC, NIC WISE RE LLC, 1701 )
18TH STREET, LLC, 1715 18TH )
STREET, LLC, 1723 18TH STREET, )
LLC, and 747 R STREET, LLC, )
)
Plaintiffs/Counterclaim Defendants, )
)
v. ) C.A. No. 2023-0637-NAC
)
STARTOP INVESTMENTS, LLC, )
)
Defendant/Counterclaim Plaintiff, )
)
and )
)
WISHON ROW, LLC, BW INDUSTRIES )
INC., and BITWISE INDUSTRIES, INC., )
)
Defendants. )

POST-TRIAL MEMORANDUM OPINION
Date Submitted: June 18, 2025
Date Decided: April 8, 2026

Richard L. Renck, Brandon R. Harper, DUANE MORRIS LLP, Wilmington,
Delaware; Stephen H. Sutro, Suzanne R. Fogarty, DUANE MORRIS LLP, San
Francisco, California; Counsel for Plaintiffs/Counterclaim Defendants NICbyte LLC,
NIC Wise RE LLC, 1701 18th Street, LLC, 1715 18th Street, LLC, 1723 18th Street,
LLC, and 747 R Street, LLC.

Neil R. Lapinski, Phillip A. Giordano, Madeline R. Silverman, GORDON,
FOURNARIS & MAMMARELLA, P.A., Wilmington, Delaware; Counsel for
Defendant/Counterclaim Plaintiff StarTop Investments, LLC.

Marc S. Casarino, Katie Barksdale, KENNEDYS CMK LLP, Wilmington, Delaware;
Counsel for Defendants Wishon Row, LLC, BW Industries Inc. and Bitwise Industries
Inc.

COOK, V.C.
One might say that trial is, in some ways, like an archaeological dig. Similar

to a fact-finder, an archaeologist is tasked with piecing together what exists from a

record that naturally degrades over time. But a spoliated record presents added

challenges, and at the risk of over-extending the analogy, is like coming across a

robbed grave or natural disaster site—only some scattered bones and bare

foundations remain. What, then, is a court to do, particularly when the spoliation

also concerns fraud and attendant misrepresentations and forgeries?

This post-trial opinion addresses the defendant’s efforts to enforce claimed

security interests over property owned indirectly by the plaintiffs when the loan

documentation giving rise to the security interests was the work of a rogue manager

engaged in fraud and known to be a rogue manager by the defendant and its

principals. Before trial, this Court found that the defendant, through its principals,

engaged in the spoliation of evidence, deleting thousands of documents, including text

messages, emails, and data room documents. The Court found that burden-shifting

and an increase in the burden of proof on the defendant’s counterclaims and defenses

were appropriate as an initial remedy. The Court reserved decision on whether to

impose more severe sanctions.

After a two-day trial, having examined all exhibits submitted and considered

the testimony of all witnesses, the Court finds that the defendant intentionally

destroyed evidence and, in doing so, severely prejudiced the plaintiffs. For the

reasons discussed in this decision, the Court imposes, as a further sanction, an
adverse inference that the plaintiffs’ agent did not have authority to enter into the

loans and that the defendant knew it.

I thus find that the plaintiffs are entitled to an injunction against enforcement

of the claimed security interests in the loans. I also address objections to the plaintiffs’

Rule 88 affidavit regarding the spoliation motion.

I. FACTUAL BACKGROUND 1

The facts are drawn from the post-trial record, which includes 33 stipulations

of fact, over 1,300 exhibits, and trial testimony from four witnesses. Having

evaluated the credibility of the witnesses and weighed the evidence, the Court makes

the following findings.

A. Soberal and Hardcastle

In the fall of 2013, Jake Soberal reached out to David Hardcastle about a

possible client engagement. 2 Soberal was the co-founder of Bitwise Industries Inc.

(“Bitwise”), a company located in Fresno, California that provided technology

training. 3 Bitwise is a wholly owned subsidiary of BW Industries Inc. (“BW

1Joint trial exhibits are cited as “JX ___,” and trial testimony is cited as
“TT___([Name]).” Citations to PTO refer to the Amended Joint Pre-Trial Stipulation and
Order. Dkt. 185.

2 JX 1.

3 TT 566:4–6 (McCormick); JX 1.

2
Industries”), a Delaware corporation. 4 Soberal and Irma Olguin Jr. were the co-CEOs

of BW Industries and Bitwise. 5

Soberal worked with Hardcastle on a website development project. 6 The

“working relationship,” however, ended in 2015 over a billing dispute, with both sides

accusing each other of “dishonest[y] and unfair[ness].” 7 That exchange was a

foreshadowing of events to come.

In 2022, Soberal moved into the same neighborhood as Hardcastle and lived

around the corner. 8 Around that time Soberal asked Hardcastle for a short-term

loan to Bitwise.

B. The Unsecured Loans

Soberal pitched to Hardcastle the need for an unsecured $1 million bridge loan,

claiming that Bitwise was in the final stages of selling a third of his company. 9

Soberal represented that although Bitwise had a minimum of $40 million in cash, it

4 PTO ¶¶ 10, 11. For simplicity, I refer to Bitwise and BW Industries collectively as
“Bitwise” unless specificity is required.

5 Id. ¶ 12.

6 TT 12:10–12 (Hardcastle).

7 JX 5 at 3 (Soberal emailing Hardcastle that, “[a]s I mentioned in our phone
conversation, I strongly disagree with your conclusion and believe that you and your team
are being dishonest and unfair in our efforts to resolve this billing inquiry”); id. at 2
(Hardcastle emailing Soberal that, “[w]hat I do know though after my audit with regards to
our original agreement and what has been paid and what has been delivered, that’s not
dishonest or unfair, that’s black and white. If you don’t make good on that, that would be the
definition of unfair and dishonest”).

8 TT 13:1–6 (Hardcastle).

9 JX 39.

3
could not service any capital or real estate needs until the purported deal closed. 10

He needed the loan in two days, and offered a ten percent “loan fee” on a 90-day

term. 11

Hardcastle loaned nearly half the amount. 12 He solicited investors for the

rest. 13 He conveyed the same story he heard from Soberal—that Bitwise could not

use its own cash for capital expenditures and real estate spending and was in need of

a bridge loan. 14

On May 30, 2022, Soberal sent an executed note to 2112 LLC (“2112”), a

company owned by Hardcastle (“First 2112 Loan”). 15 The note was for $1 million in

principal with a “fixed loan fee” of $100,000 due on August 29, 2022. 16 Hardcastle

received a two percent marketing fee of $20,000. 17

10 Id.

11 Id.

12 TT 21:1–6 (Hardcastle). Hardcastle loaned the money through one of his companies,

HGM Holdings, LLC. TT 20:21–21:7 (Hardcastle). This loan was later consolidated into the
2112 loan. TT 205:16–19 (Hardcastle).

13 JX 38, 40.

14 See JX 67.

15 PTO ¶ 17; JX 48.

16 JX 48.

17 The other loan documents included a guaranty agreement and side letter. Id.
Hardcastle specifically requested that his marketing fee not be documented on the note, but
instead in a side letter. JX 51. (“Leave the 2% marketing fee off the note.”). BW Industries
signed as both the borrower and the guarantor. JX 48.

4
Soberal soon needed more cash. On June 7, Hardcastle made another loan on

similar terms as the first (“Second 2112 Loan”). 18 It was due three months later. 19

Hardcastle received another two percent marketing fee. 20

In structuring these loans, Hardcastle, through 2112, received funds from

investors and then made the loan to Bitwise. 21 This arrangement limited the

visibility investors had into Soberal. Going forward, Hardcastle continued this

intermediary role between Soberal and investors.

C. Bitwise and NICbyte form NIC Wise

In the same month, Soberal was negotiating a sale-leaseback transaction with

Plaintiff NICbyte LLC (“NICbyte”). On June 6, 2022, NICbyte and Wishon Row LLC

(“Wishon Row”) created a joint venture entity called NIC Wise RE LLC, a Delaware

limited liability company (“NIC Wise”). 22 Under the limited liability company

agreement governing NIC Wise (“JVA”), NICbyte owned 95 percent of the

membership interests, contributing approximately $35.5 million. 23 Wishon Row

18 JX 64.

19 Id.

20 Id.

21 TT 35:11–15 (Hardcastle) (“I just did a note between 2112 and the lender and then

just did a note between 2112 to Bitwise.”). Investors referenced above participated via a loan
participation agreement. See, e.g., JX 278. The decision refers to them as investors for ease
of reference.

22 PTO ¶¶ 1, 2, 14.

23 JX 95 (“JVA”), Ex. A. and Schedule 2.3.

5
owned the other five percent. 24 BW Industries wholly owned and managed Wishon

Row. 25

The parties entered into the JVA as part of a transaction involving the sale

and lease of real estate. 26 The relevant properties included three properties in

Bakersfield, and another in Fresno, California (respectively, the “Bakersfield

Properties,” and “Fresno Property”). 27 BW Industries sold these real estate

properties to wholly owned subsidiaries of NIC Wise for approximately $32.5

million. 28 NIC Wise then leased the properties back. 29 This allowed Bitwise to

unlock capital assets from the sale proceeds while retaining use of the properties. 30

Wishon Row had restricted responsibility for managing NIC Wise’s business

and affairs under the JVA. 31 Unless Wishon Row obtained the consent of NICbyte,

the JVA prohibited Wishon Row from (a) obtaining any financing, (b) pledging or

transferring any interest in or granting an encumbrance on any of the real estate

24 PTO ¶¶ 1, 9; JVA.

25 PTO ¶ 11.

26 TT 513:3–10 (McCormick).

27 See JVA Art. 1.

28 JVA, Ex. A and Schedule 2.3; see, e.g., JX 96, 97; TT 513:3–10 (McCormick). The
relevant wholly owned subsidiaries were 747 R Street LLC, 1701 18th Street LLC, 1715 18th
Street, LLC, and 1723 18th Street, LLC. PTO ¶¶ 3–6.

29 See, e.g., JX 96, 97; TT 513:3–10 (McCormick).

30 See Carla Tardi, Leaseback (or Sale-Leaseback): Definition, Benefits, and Examples,

Investopedia (last updated August 8, 2025), https://www.investopedia.com/terms/l/leaseback.asp.

31 See JVA Art. 6.

6
properties, or (c) granting a security interest in the membership interests or other

Company assets. 32 Any unauthorized transfer, assignment or other disposition of a

member’s “right, title or interest in the Company,” or encumbrance, hypothecation,

or pledge of such right, title or interest would be deemed “void and ineffective.” 33 The

JVA further provided that:

[n]othing herein contained shall impose any obligation on any Person or
firm doing business with the Company to inquire as to whether or not
the Manager has exceeded its authority in executing any contract,
agreement, lease, mortgage, note, guaranty, loan agreement, pledge,
security agreement or other evidence of indebtedness, deed, assignment,
conveyance or other transfer instrument or any other document or
instrument of any kind or nature (each, a “Contract”) on behalf of the
Company, and any third person shall be fully protected in relying upon
Manager’s confirmation of such authority. 34

D. Soberal Encumbers the Fresno Property and Extends the New Loan

A few weeks from the due date of the First 2112 Loan, Soberal reached out to

Hardcastle for another $1 million, offering to secure the loan with the Fresno

Property. 35 But Soberal did not want the security interest recorded—proposing to

Hardcastle that they utilize a “springing deed of trust” with first lien priority. 36 As

mentioned above, the JVA prohibited Soberal from encumbering the real estate

properties without NICbyte’s consent. By not recording the deed of trust, Soberal

32 JVA § 6.5(a)(i), (ii), (iv), (v).

33 JVA § 9.1.

34 JVA § 6.1.

35 JX 258.

36 Id.

7
could conceal the transaction from NICbyte. The limited record suggests that Soberal

did not explain his need for the deed of trust to go unrecorded, and Hardcastle did

not ask any questions, except as to the fee amount. 37

As with the First 2112 Loan on May 30 and the Second 2112 Loan on June 7

2022, Soberal’s request was made on short-notice—he purportedly needed to submit

a purchase order for equipment “by tomorrow” and “prefer[red] not to use [the]

balance sheet.” 38 Ignoring these red flags, Hardcastle told Andrew Adler, his

business partner at StarTop Investments, LLC (“StarTop”), 39 to “[c]heck slack, just

sent you a loan deal that is juicy.” 40 Because Hardcastle and Adler deleted their Slack

messages, the Court has no record of what Hardcastle shared with Adler.

Adler initially opposed the idea of not recording the deed of trust. He preferred

to structure the transaction as a “repo loan,” so that in a “best case scenario” they

could foreclose on the property in the event of a default within the 30-day term. 41

StarTop has not produced any other internal communications shedding light on why

Hardcastle did not proceed with that option.

Hardcastle soon closed on this third loan to Bitwise. On August 26, 2022,

Hardcastle loaned another $1 million, secured by an unrecorded deed of trust, on a

37 Id.

38 Id.

39 PTO ¶ 8.

40 JX 259.

41 JX 262.

8
30-day term, with a “fixed loan fee” of $60,000 (“Third 2112 Loan”). 42 The due date

on the loan was September 30, 2022, unless “extended by agreement.” 43 Hardcastle

received a $30,000 marketing fee as documented in a separate side letter. 44 After

receiving the Third 2112 Loan, Soberal paid off the First and Second 2112 Loans on

September 7, 2022. 45

Ten days before the Third 2112 Loan was due, Hardcastle agreed to Soberal’s

request to extend the due date for another two or three months. 46 Apart from the

payment of fees, StarTop has not produced any other recorded communications

between Adler and Hardcastle shedding light on Hardcastle’s choice to extend the

loan as opposed to collecting on the debt in the event of a default, as Adler initially

suggested.

E. Patrick Investments Loan

The communications in the record among Soberal and StarTop’s principals

become sparse for the next month and a half. 47 They pick up again on November 13,

42JX 275 (“While the Deed of Trust is upon execution enforceable, Beneficiary
covenants that it shall only record this Deed of Trust in the event of an uncured default under
the Note or this Deed of Trust.”).

43 JX 278.

44 JX 275.

45 JX 299.

46 JX 317.

47 See, e.g., JX 335 (September 30, 2022 text between Hardcastle and Adler), JX 378

(October 13, 2022 email from Soberal to Hardcastle), JX 393 (November 13, 2022 text from
Soberal to Hardcastle).

9
2022, when Soberal makes a request to Hardcastle for another loan. 48 Hardcastle in

turn began soliciting interest, which led to discussions with Patrick Investments LLC

(“Patrick Investments”). 49 The “springing” deed of trust became a sticking point.

Patrick Investments flagged a clause in the draft documents that 2112 would

not record a deed of trust unless there was a default. 50 Soberal pushed back, telling

Hardcastle that recording the deed of trust would “complicate things on our end.” 51

Soberal wanted Hardcastle to “[p]lease keep [him] posted on the issue of recording,”

and that the “pricing [was] very high for an over secured, recorded position.” 52

Hardcastle responded with a thumbs up emoji. 53

Hardcastle told Patrick Investments that recording the lien on any properties

would “add complexity” to another purported deal involving the sale of the properties

that Soberal was working on. 54 He reiterated Soberal’s desire to not record the deed,

and that Soberal would add another property as collateral in exchange for the

condition to not record. 55 He also sent draft documents for Patrick Investments’ legal

48 JX 393.

49 See, e.g., JX 405, 406.

50 JX 417.

51 JX 418.

52 Id.

53 Id.

54 JX 419.

55 Id.

10
team to review. This was the second instance in which Hardcastle or Adler were

aware of and agreed to an unrecorded springing deed of trust, the fairly obvious

purpose of which was to keep the purported security interest secret.

The comments Hardcastle received back were alarming. Patrick Investments’

attorney wrote that the drafts were the “worst legal documents I have ever

encountered.” 56 He “doubt[ed] whether they could be enforced” as written and gave

a “sampling of the problems.” 57 For example, the note contained incorrect references

to the borrower as the payee, did not have a maturity date for the loan or a stated

interest rate (only a monthly “loan fee”), and listed a borrower (BW Industries) that

did not own the real estate property. 58 He raised concerns about the enforceability of

an unrecorded deed of trust and warned that Soberal could sell the property without

giving notice to Patrick Investments. 59 The attorney described the deal as “an

unsecured handshake loan” 60 and advised “run[ning] away as fast as you can.” 61

Hardcastle did not heed the warning. Soberal revised the draft loan documents,

and sent Hardcastle organizational entity documents that included the JVA to

56 JX 434.

57 Id.

58 Although documents such as the 2112 loans reference “loan fees,” it seems that the

“fees” operated, for all intents and purposes, as high interest rates on short-term loans, with
the characterization as “loan fees” perhaps intended to muddy the waters as to that reality.

59 JX 434.

60 Id.

61 Id.

11
address concerns about the ownership of the property. 62 Hardcastle passed on

Soberal’s comments and included the organizational documents that Soberal sent.63

Even with Soberal’s revisions to the draft documents, Patrick Investments was not

willing to proceed in light of its counsel’s “strong[]” recommendation not to. 64

Faced with resistance from Patrick Investments, Hardcastle told Soberal that

he would have to record the deed of trust for the deal to go forward. 65 About fifteen

minutes later, Hardcastle emailed Patrick Investments that he “spoke with [Soberal]

and he’s willing to record a deed of trust to get the deal done.” 66

On December 19, 2022, Patrick Investments agreed to loan $2.75 million at an

interest rate of five percent per month on a 90-day term secured by a recorded deed

of trust that reached the Bakersfield Properties (“Patrick Loan”). 67 Hardcastle

received a $55,000 marketing fee. 68

To close on the loan, Soberal sent Patrick Investments organizational

documents showing the line of ownership of the properties. The copy of the JVA that

he forwarded, however, differed materially from the one Hardcastle sent a few weeks

62 JVA 435, 439, 440.

63 See JX 435, 446.

64 JX 466.

65 JX 475.

66 JX 466.

67 JX 525, PTO ¶ 22. On February 15, 2023, Soberal extended the Patrick Loan for an
additional $1.5 million. JX 854.

68 PTO ¶ 22.

12
prior. 69 The prior version was 45 pages long, and correctly named NICbyte as a

member. 70 The new version was an entirely different document—running only five

pages long and falsely listing Wishon Row as the sole member. 71 Soberal included

Hardcastle on the email.

Once the Patrick Loan closed, Soberal paid off two other loans Hardcastle and

Adler had issued, through their investment vehicles, during negotiations with Patrick

Investments. 72 Soberal also paid extension and monthly loan fees on the Third 2112

Loan. 73

Recognizing Soberal’s insatiable need for liquidity and the fees extracted thus

far, Adler next conceived of ways “to squeeze money out . . . on the participant side

too.” 74 That opportunity came in the form of the first StarTop loan for $10 million.

As Soberal’s co-CEO Olguin noted to Soberal in a text, “[i]t’s kind of funny, when you

think of it. Maybe we just need $10M every month to refinance the $10M we

69 Compare JX 538 with JX 435.

70 JX 435.

71 JX 538.

72 JX 468, 486, 491, 568.

73 JX 452, 453, 568.

74 JX 584.

13
borrowed the month before.” 75 Hardcastle made a related point to Adler: “[Soberal]

always needs money. I think we’ll be making fees off BW for many months to come.” 76

F. StarTop Engages in Fraud to Issue the First StarTop Loan

While Hardcastle was working on the Patrick Loan, he and Adler began

soliciting investors for the $10 million loan. Hardcastle and Adler represented to

investors that it would be offered at a two percent monthly rate, or nominal 24 percent

rate per annum. 77

But that was an outright lie. The term sheet that StarTop executed with

Bitwise was actually documented at a five percent monthly rate, not two. 78 The idea

was that, with Bitwise paying a sky-high 60 percent nominal interest rate but

StarTop’s investors believing the rate was only 24 percent, Hardcastle and Adler

could keep the delta and no one would be the wiser. To conceal this, Adler fabricated

the term sheet and promissory note. 79 Adler further instructed Hardcastle to use the

75 JX 574.

76 JX 584.

77 See, e.g., JX 496, 1236; TT 390:9–391:14 (Adler). In its motions in limine, StarTop
argued that StarTop’s representations as to the interest rate it charged on the underlying
loan documents are without “probative value in this litigation” and should be excluded. See
Dkt. 127, Defendant StarTop Investment, LLC’s Combined Response in Opposition to
Plaintiffs’ Motion for Sanctions and Motion in Limine to Bar Irrelevant and Extremely
Prejudicial Testimony ¶ 41. The Court denied the motion without prejudice with the
opportunity to renew any objections in post-trial briefing. See Dkt. 197 (“Transcript Ruling
on Motion in Limine and Motion for Spoliation”). Having considered again StarTop’s
objections under Delaware Rules of Evidence (“D.R.E.”) 401–403, as explained below, such
representations are relevant to key questions in this action.

78 JX 1223, 1233.

79 JX 628, 723, 765, 769, 1233; TT 505:18–507:13 (Adler).

14
falsified promissory note if investors asked to see it. 80 Adler later deleted the falsified

term sheet from the deal room during discovery in this action. 81

Adler and Hardcastle also included terms in the loan that they expected

Soberal would violate and that they had no intention of enforcing. Adler pointed out

to Hardcastle that a use of funds clause was necessary to convince investors to

participate because otherwise “everyone will assume [Soberal] will be using borrowed

funds to pay back the high interest rate debt.” 82 The limited, spoliated record that

remains strongly suggests Hardcastle and Adler knew this was Soberal’s modus

operandi. When Soberal wanted the clause “updated” in the term sheet, Hardcastle

told Soberal: “[D]on’t worry about that. We can’t tell where it’s going anyway. Just

for our lenders in case they ask.” 83

Adler and Hardcastle also received falsified organizational documents and

board consents from Soberal. The organizational chart and board consents that

Soberal sent falsely listed NIC Wise as wholly owned by Wishon Row. 84 These

documents plainly contradicted the unadulterated JVA that Hardcastle had in his

possession from negotiations with Patrick Investments. The board consent from BW

80 JX 765.

81 JX 1312 ¶ 37, 1223, 1182; TT 505:18–507:13 (Adler).

82 JX 589.

83 JX 591, 592.

84 JX 590 at 47.

15
Industries made the same misrepresentations in the opening recitals. 85 In addition,

on the signature audit trail for the purported BW Industries’ board consent, Soberal

redacted the lines for the IP address and email address next to each director’s name

to conceal that he electronically forged their signatures. 86 StarTop has produced no

internal communications between Adler and Hardcastle concerning the authenticity

of these documents.

On January 13, 2023, Bitwise issued a note to StarTop for $10 million at a

monthly interest rate of five percent on a 12 month term. 87 The $10 million note was

secured by a recorded deed of trust encumbering the interests of the entity that

directly owned the Fresno Property. 88 Soberal signed a pledge agreement on behalf

of NIC Wise, pledging its membership interests in the entity that directly owned the

Fresno Property. 89 StarTop did not provide a true copy of the note to investors. As

with the term sheet, Adler forged this document as well. 90

85 JX 694, 724.

86 JX 694, 724.For the second StarTop loan, it appears Soberal omitted the audit trail
altogether. See JX 933.

87 JX 718.

88 JX 806.

89 JX 714.

90 JX 723.

16
G. StarTop Enlists Soberal’s Help to Conceal Fraud

At the start of February 2023, Soberal began asking for $5 million on similar

terms as the first StarTop loan. 91 But Adler recognized that continuing to loan

Soberal money, even at the (false) annualized 24 percent interest rate, would prompt

questions from investors. If their investors knew the true, and much higher, interest

rate that they were charging, their fraudulent scheme would likely quickly unravel.

Capturing this conundrum in a text to Hardcastle, Adler pointed out the risk that

investors could start “asking bitwise why the hell are you borrowing at these rates . . .

[w]hich btw we are lending even higher then [sic] 24%.” 92 In an attempt to avoid this

outcome, Adler initially proposed avoiding any direct contact between Soberal and

the investors, offering to Hardcastle that “I will casually reiterate not to discuss with

the borrower or employees of the borrower.” 93 But Hardcastle had other ideas and

wanted to include Soberal in a call with one of the potential investors.

Adler told Hardcastle that they needed to “prep” Soberal on “why he needs the

$$/use of funds” and “[w]hy he is borrowing at these expensive rates (24% if they

91 JX 810, 838.

92 JX 827.

93 Id.

17
ask).” 94 Hardcastle replied that “[he’d] coach him up on it.” 95 About ten hours later,

Hardcastle texted Adler, “[t]alked to [Soberal], he’s ready to go.” 96

The call with the investor took place the same day, on February 24. 97 With

Soberal on the call, Hardcastle and Soberal offered fabricated reasons justifying the

stated high-interest rate, while actively concealing the even higher true rate. Soberal

knew what the actual rate was but collaborated with Hardcastle and Adler in

concealing the fraud.

94 JX 868.

95 Id.

96 Id.

97 Id. Although Hardcastle’s testimony was evasive, his testimony and Adler’s, if
anything, bolstered the finding of duplicity behind the call. Compare TT 345:4–8 (Hardcastle)
(“Q: I don’t remember exactly if it was being -- if he confirmed . . . that’s what they were
paying or if that’s what they were going to receive, the 24 percent. I don’t remember how that
conversation went.”), with TT 345:9–486:8 (Hardcastle) (“THE COURT: Well, I will put it to
you, I, frankly, think you’re lying to me right now. I think that it makes no sense why it is
that Long Angle would ask Mr. Soberal the amount that a loan would be marketed to Long
Angle as an investor in your firm. What it seems to me is that Long Angle would be inquiring
of Mr. Soberal of the interest rate that his firm was paying on the loan. And they were very
interested in understanding why he would be paying such a high interest rate because that
would be very important to understand as part of their investment decision-making process.
And the fact that Mr. Soberal told them a much lower rate than what was actually the rate
on the loan would seem to be an extraordinarily material fact that was concealed and the
subject of a false statement during that conversation with the specific intent to influence
Long Angle’s decision of whether or not to invest. And you sat there and said nothing,
knowing all of this. So I’m putting to you quite directly as to what it is that is my impression
of all of this and of your testimony.”). TT 289:23–290:7 (Hardcastle) (“A. He didn’t say it in
those words, but he said okay. Q. And, in fact, on the call, on the Zoom meeting with Long
Angle, he said the loan was at 24 percent, didn’t he? A. I think they asked, and he just
confirmed that it was 24 percent.”); TT 391:11–14 (Adler) (“But, yeah, it was confirmed to be
at 24 percent. And we did represent to them that the loan was paying at 24 percent. That
was a misrepresentation.”).

18
Meanwhile, Bitwise started missing payment deadlines. On March 2, 2023,

Bitwise was late on a monthly payment. 98 The explanation Soberal gave to

Hardcastle, and that Hardcastle relayed to Adler, was that a lender had frozen

Bitwise’s accounts for a technical reason. 99 Adler responded: “if he knew he has this

issue with his other lender was he bold face lying when he told you he set up the wire

yesterday morning?” 100 In any event, Hardcastle agreed to cover a late payment to

Soberal “so that our investors would never know the difference.” 101

StarTop then closed on the $5 million loan on March 15, 2023. 102 The loan was

secured by deeds of trusts encumbering the interests of the entities that directly

owned the Bakersfield Properties. 103 The loan cross collateralized the Bakersfield

and Fresno Properties and aggregated the total loan amounts to $20.4 million. 104

Soberal signed pledge agreements for each of the Bakersfield Properties. 105 More

98 JX 883.

99 JX 885, 888.

100 JX 888.

101 JX 890, 891, 893.
Soberal told Hardcastle that he had to “fund payroll personally[,]”
to which Hardcastle responded “[a]lways fun being in charge.” JX 902.

102 JX 953.

103 JX 949, 950, 951.

104 JX 957.

105 JX 963, 964, 965.

19
than half of the proceeds went to paying off the Patrick Loan, as well as interest and

fees to StarTop. 106

H. NIC Wise Discovers Soberal’s Fraud

By May 2023, payments from Soberal to StarTop dried up. On Memorial Day

weekend, NICbyte learned from a news article that Bitwise furloughed its employees

and was shutting down. 107 NICbyte then ran a title search of the NIC Wise

subsidiaries’ properties and discovered the loans from StarTop and purported

encumbrances. 108 NICbyte quickly filed suit in California Superior Court and

obtained a temporary restraining order enjoining Soberal and his affiliated entities

from disposing of or transferring the properties. 109

StarTop took heed of NICbyte’s actions against Bitwise and engaged in

preemptive measures, setting the stage for this litigation. On May 30, Adler texted

Hardcastle to “not communicate with [Soberal] in writing anymore . . . no text or

email . . . We’re in lawsuit mode and he can use against us.” 110 On June 15, StarTop’s

counsel then sent a letter to NICbyte informing it of its election to transfer all assets

and interests of the relevant entities to StarTop. 111 The next day, NICbyte’s counsel

106 JX 956.

107 TT 409:10–18, 547:10–20.

108 TT 547 (McCormick).

109 JX 1079, 1126.

110 JX 1081.

111 JX 1127, 1128, 1129, 1130, 1131, 1132, 1133, 1134.

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sent a document preservation notice to StarTop’s California counsel (“Litigation

Hold”). 112 As discussed in more detail below, the record shows that Adler and

Hardcastle engaged in wide-ranging spoliation of critically important data after

delivery of the Litigation Hold.

On June 28, 2023, BW Industries and Bitwise filed for Chapter 7 Bankruptcy

in Delaware Bankruptcy Court. 113 Soberal and Olguin pled guilty to criminal charges

of wire fraud and conspiring to commit wire fraud. 114 They are serving prison terms

of eleven and nine years, respectively. 115 Adler and Hardcastle pled guilty to

conspiracy to commit wire fraud. 116

Altogether, Hardcastle and Adler contributed approximately $1.1 million to

the StarTop loans and netted over $1.75 million. 117 But in addition to the fees they

collected, they sought to collect on the loans to Bitwise by seeking to enforce the

challenged loan documents.

112 JX 1136.

113 PTO ¶ 13.

114 JX 1221, 1222.

115 PTO ¶ 32.

116 Dkt. 235, Ex. A, JX 1317. StarTop objects to the admissibility of the Hardcastle
indictment, Adler’s plea, and the hearing transcript from Hardcastle’s detention hearing
under D.R.E. 403 as “extremely prejudicial.” Defendant StarTop Investments, LLC’s
Answering Post-Trial Brief at 14, 23, 40. But the Court does not rely on these for its analysis.

117 See JX 736, 787, 789, 956, 958.

21
I. StarTop Spoliates Evidence

On June 20, 2023, Plaintiffs NICbyte, NIC Wise, 1701 18th Street, LLC, 1715

18th Street, LLC, 1723 18th Street, LLC, and 747 R Street, LLC initiated this action

against Defendants StarTop, Wishon Row, BW Industries and Bitwise. Plaintiffs

sought declarations that the StarTop loan documents are void and unenforceable, and

an injunction enjoining their enforcement. StarTop counterclaimed, seeking

declaratory and injunctive relief to enforce the loans. 118

A few weeks before trial, Plaintiffs moved for sanctions against StarTop due to

spoliation of evidence. I heard oral argument on the motion on October 18, 2024. In

light of the “unusual and troubling” evidence presented, the Court postponed the trial

and appointed a Special Discovery Neutral to conduct an investigation. 119 After

submission of the Special Discovery Neutral’s report and supplemental submissions

by the parties, the Court concluded that StarTop spoliated evidence.

The record of investigations into spoliation in this matter shows that software

issues limited after-the-fact tracking of deletions. But even the limited audit trail

data available shows deletion on a frankly vast scale. Beginning at the latest in mid-

November 2023 (and almost certainly in the weeks and months before, as well), 120

118 The parties’ sought-after relief has remained largely unchanged following trial.

119 Dkt. 150, Ruling on Appointment of Special Discovery Neutral at 45:23–24.

120 Transcript Rulings on Motion in Limine and Motion for Sanctions 22:8–15 (“I have

basically zero confidence that no deletions occurred prior to November of 2023. The discovery
neutral’s report noted that Microsoft only introduced its Graph Activity Logs feature in
October of 2023. This feature was responsible for providing users with access to action audits
like the email deletion notifications.”).

22
Adler and Hardcastle deleted Slack messages, text messages, emails and other deal

room data dating from April 1, 2022 to January 25, 2024 (“Relevant Time Period”). 121

With audit tracking capability commencing in November, the record confirms that

deletions occurred in November and December 2023, 122 with the timing roughly

coinciding with NICbyte’s service of discovery requests and also around the time

NICbyte filed its first motion to compel. 123

Text messages between Adler and Hardcastle further show that they

exchanged Slack messages during the period of August 2022 to March 2023. 124 This

suggests they were active Slack users and that Slack messages would have been a

vital source of information in this case. But their deleted Slack messages became

non-recoverable 90 days after deletion. 125 Had Adler and Hardcastle complied with

the Litigation Hold’s instructions, deleted Slack messages exchanged after the second

StarTop loan could have been recovered and available for use in this matter. 126

121 See Dkt. 153, Special Discovery Neutral’s Report (“Report”).

122 See Dkt. 158, Affidavit of Andrew J. McClary in Support of Special Discovery
Neutral’s Report (“McClary Aff.”) ¶ 48 (chart showing timeline of email deletions).

123 See Dkts. 10, 13, 44.

124 See, e.g., JX 259 (“Check slack, just sent you a loan deal that is juicy[.]”), 502, 1013.

125 McClary Aff. ¶ 17.

126 See JX 1136 (“Your obligation is not merely to avoid deleting files, but to take

affirmative steps to preserve relevant information and evidence, including making necessary
back-ups and suspending any regular document or file destruction practices.”).

23
As for other written communications, Adler deleted 101,979 text messages

from the Relevant Time Period. 127 Hardcastle and Adler attempted to delete Dropbox

files four times, including the falsified term sheet from the first StarTop loan. 128 And,

Hardcastle did not preserve communications on his phone by reconfiguring retention

settings after receiving the Litigation Hold. 129 Plaintiffs further showed prejudice by

identifying key gaps in the documentary record that included a lack internal

communications between Hardcastle and Adler as well as a lack of communications

or documents concerning StarTop’s diligence in executing the loans.

As an initial sanction, the Court shifted the burden of proof to StarTop on any

claims or elements for which Plaintiffs had the burden of proof. It also raised the

burden of proof on StarTop’s claims or defenses to require a showing by clear and

convincing evidence, which included the defense that Soberal had authority to enter

into the loan documents. 130 The Court granted Plaintiffs’ request for attorney’s and

127 McClary Aff. ¶ 25.

128 See Report at 11 (“DLS [Discovery] identified four attempts to delete DropBox files:

(a) an attempt on May 16, 2022 by Mr. Hardcastle to delete records; (b) the existence of 15
DropBox records in Mr. Adler’s Recycle Bin (13 of which have been produced to NICbyte); (c)
Mr. Adler’s November 11, 2023 movement of Bitwise Term Sheet - Startop Investments
(Bakersfield Trio signed) to Trash; and (d) Mr. Adler’s October 10, 2023 movement of Bitwise
Term Sheet - Startop Investments (final signed) to Trash.”) (internal quotes omitted).

129 McClary Aff. ¶ 24.

130 Dkt. 190, Order Denying Defendant Startop Investments, LLC’s Motion In Limine

And Granting Plaintiffs’ Motion For Sanctions Due To StarTop Investments, LLC’s
Spoliation Of Evidence (“Sanctions Order”) ¶ 4; see also Walker v. FRP Invs. GP, LLC, 336
A.3d 542, 562 (Del. Ch. 2025) (“A party asserting an affirmative defense bears the burden of
proof.”) (citation omitted).

24
expert’s fees and expenses. The Court reserved decision on whether to impose more

severe sanctions based on the evidence presented at trial.

Plaintiffs submitted a Rule 88 affidavit related to their spoliation motion in

support of their fees and expenses, totaling $423,781. StarTop opposed and

submitted objections.

Trial took place on February 25–26, 2025. Counsel presented post-trial

argument on June 18, 2025.

II. ANALYSIS

Plaintiffs seek declarations that the pledge agreements, deeds of trust, and the

StarTop loan documents are void ab initio and unenforceable on three separate

grounds: they were procured by fraud and forgery, violate the JVA, and certificate of

incorporation of BW Industries. 131 Further, they argue that, even if the loan

documents are voidable, StarTop cannot meet its burden of proving actual or

apparent authority. 132 Nor, so Plaintiffs argue, is StarTop entitled to enforce the loan

documents under the doctrine of unclean hands and in pari delicto. Plaintiffs thus

131 PTO ¶¶ 36, 107; see Dkt. 218, Plaintiffs’ Opening Post-Trial Brief (“Pls. Opening

Br.”) at 33.

132 PTO ¶ 49; see Pls. Opening Br. at 40.

25
seek, in part, an injunction against Defendants enjoining the enforcement of the loan

documents. 133

StarTop seeks mirror-image declaratory and injunctive relief. In relevant part,

StarTop seeks declarations that the transfer of ownership interest in the NIC Wise

subsidiaries and underlying property to StarTop are valid, that the underlying loan

documents are valid and enforceable against Plaintiffs, that StarTop is the sole

member of the NIC Wise subsidiaries, and that it has full right, title, interest and

ownership in the underlying properties. 134 StarTop seeks in part injunctive relief

requiring payment of all rents and revenues associated with the underlying

properties, and all actions necessary to transfer control to StarTop of the

properties. 135

StarTop contends that the requisite authority existed for Soberal to enter into

the loan documents to bind Plaintiffs, and that it was appropriately relying upon

Section 6.1 of the JVA in deciding to undertake no further investigation into Soberal’s

representations of his authority. StarTop finally argues that the doctrine of unclean

hands is unavailing because this doctrine cannot serve as defense where, according

to StarTop, it is only bringing a legal claim—here, a single counterclaim for

133 PTO ¶ 108.

134 Id. ¶ 112.

135 Id. ¶¶ 113–114.

26
declaratory judgment. 136 In sum, StarTop believes that as a third-party beneficiary

under Section 6.1 of the JVA, it is entitled to a declaration that the loan documents

are enforceable.

Having considered the evidence, I need not address the entire tangle of

arguments the parties raise here. Even assuming that the documents at issue are

not void, 137 the contemporaneous written record and the record of spoliation compel

the Court to conclude that an adverse inference that Soberal did not have apparent

authority to enter into the loans is warranted. Furthermore, the Court finds that

StarTop failed to meet its burden of proof that Soberal was authorized to enter into

the loans.

136 StarTop further adds that in pari delicto does not apply because such a doctrine

only applies to parties “equally at fault.” See Dkt, 225, Defendant StarTop Investments,
LLC’s Answering Post-Trial Brief at 44. StarTop attempts to walk back that it seeks
equitable relief by insisting that its claims do not “sound in equity.” Id. at 42. Even if the
Court were to allow such a retreat, treating StarTop’s posture as a purely legal one would
result in a form of judicial “limbo” in which StarTop’s interest in the relevant properties were
upheld as valid but one in which it could not enforce in this court.

137 CompoSecure, L.L.C. v. CardUX, LLC, 206 A.3d 807, 816–17 (Del. 2018) (“The
common law rule is that void acts are ultra vires and generally cannot be ratified, but voidable
acts are acts falling within the power of a corporation, though not properly authorized, and
are subject to equitable defenses.”); Klaassen v. Allegro Dev. Corp., 106 A.3d 1035, 1046 (Del.
2014) (“[t]he essential distinction between voidable and void acts is that the former are those
which may be found to have been performed in the interest of the corporation but beyond the
authority of management, as distinguished from acts which are ultra vires, fraudulent or
gifts or waste of corporate assets.”) (quoting Michelson v. Duncan, 407 A.2d 211, 218–19 (Del.
1979)); Nevins v. Bryan, 885 A.2d 233, 245 (Del. Ch.), aff’d, 884 A.2d 512 (Del. 2005) (“Void
acts are not ratifiable ‘because the corporation cannot, in any case, lawfully accomplish them.’
Void acts are ‘illegal acts or acts beyond the authority of the corporation.’ In contrast,
voidable acts are ratifiable because the corporation can lawfully accomplish them if it does
so in the appropriate manner.”).

27
In reaching these conclusions, the Court finds that it is extraordinarily likely

that StarTop’s principals were aware that the security interests on the loans involved

fraud and that Soberal was without authority to grant the interests. The notion that,

in these circumstances, Soberal had assets worth millions of dollars on which to grant

security interests, while requiring exorbitant-interest loans on short notice, is farcical.

Hardcastle and Adler would have known the security interests were fraudulent

too. Hardcastle and Adler were aware of the requests for an unrecorded springing

interest; they were aware that Soberal would likely violate the use of funds provision

and simply pay back loans out of new loans. They saw the documents Soberal was

providing showed forgery on their face, and they were aware Soberal was agreeing to

sky-high interest rates on short notice, despite supposedly having gobs of cash on

hand. And, taking a page from Soberal’s own playbook, Hardcastle and Adler forged

documents of their own to their own investors and looped Soberal in to assist.

The record of spoliation refutes StarTop’s characterizations as a mere innocent

third-party beneficiary. Soberal and Hardcastle were neighbors; Hardcastle told

Adler they were in “lawsuit mode” after NICbyte commenced litigation against

Soberal and sent its Litigation Hold; and after appointment of a Special Discovery

Neutral, rafts of communications are still missing due to StarTop’s intentional

deletion of evidence.

StarTop’s spoliation made it very difficult and expensive for Plaintiffs to put

forward contemporaneous evidence of Hardcastle and Adler’s communications

showing what they knew and were thinking. Ultimately, however, the surviving

28
evidence and surrounding circumstances point directly at the conclusion that

Hardcastle and Adler knew that Soberal lacked authority to enter into the loans with

the security interests he purported to grant. The Court must, at a minimum, impose

an adverse inference of knowledge here.

A. StarTop Cannot Rely on Section 6.1 of the JVA

To show entitlement to its claims, StarTop styles itself as an innocent, third-

party beneficiary invoking bargained-for provisions between NICbyte and Bitwise in

the JVA. StarTop distances itself from the indisputable evidence of fraud and forgery

by contending that they were products of Soberal and Bitwise’s doing, not StarTop’s,

and that they do not strip StarTop of its rights and interests in the properties. 138 The

crux of StarTop’s arguments rests on Section 6.1 of the JVA. StarTop argues that

under Section 6.1 it was “fully protected” in deciding to not engage in further inquiry

of Soberal’s representations of his authority. But StarTop’s reliance on Section 6.1 of

the JVA is untenable based on the evidence in the record and its misreading of the

terms of the provision.

The JVA provides that:

[n]othing herein contained shall impose any obligation on any Person or
firm doing business with the Company to inquire as to whether or not
the Manager has exceeded its authority in executing any contract,
agreement, lease, mortgage, note, guaranty, loan agreement, pledge,
security agreement or other evidence of indebtedness, deed, assignment,
conveyance or other transfer instrument or any other document or
instrument of any kind or nature (each, a “Contract”) on behalf of the

138 For example, StarTop contends that, even if the BW Industries board consents

were necessary to effectuate the loan transactions, the pledge agreements were not forged.

29
Company, and any third person shall be fully protected in relying upon
Manager’s confirmation of such authority. 139

Several issues arise with StarTop’s reading of this provision. First, StarTop

treats the “fully protected” language as carte blanche to enter into contracts one

knows are unenforceable or lacking in requisite authorization. That reading is

frankly absurd and treats the provision as a fraud-free-for-all. Second, StarTop’s

reading is contrary to the surrounding text. Section 6.1 protects a third-party from

having to “inquire as to whether or not the Manager has exceeded its authority[.]”

But where the party already knows the Manager has no such authority, it makes no

sense to speak of a duty to inquire into circumstances of which one is already

aware. 140 On top of this, StarTop asks that the Court credit the testimony of

witnesses that the Court found to be dubious and wholly lacking credibility, except

perhaps for Adler’s seemingly genuine remorse. 141 I therefore reject StarTop’s

attempt to employ Section 6.1 as a get-out-of-jail-free card.

I next address the claims that, even assuming that the underlying loan

documents were not void, Soberal did not have actual or apparent authority to bind

Plaintiffs.

139 JVA § 6.1.

140 See 12 Williston on Contracts § 35:69 (4th ed.) § 35:69 (“Apparent authority and its

effect vanish in the presence of the third party’s actual knowledge of the real scope.”).

141 See, e.g., TT 345:9–486:8 (Hardcastle); TT 288:9–12 (Hardcastle); TT 289:23–290:7

(Hardcastle); TT 391:11–14 (Adler).

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B. Actual Authority

An agent may bind a principal either through actual or apparent authority.

“An agent acts with actual authority when, at the time of taking action that has legal

consequences for the principal, the agent reasonably believes, in accordance with the

principal’s manifestations to the agent, that the principal wishes the agent so to

act.” 142

Soberal, through Wishon Row, did not have actual authority to enter into the

loan documents with StarTop. The JVA precluded Wishon Row from entering into a

financing, pledging NIC Wise’s interests, or encumbering its properties without the

consent of NICbyte. Soberal did not obtain that consent. 143

Unable to dispute this fact, StarTop instead argues that NICbyte’s purported

failure to pay a capital call wiped out any consent right it had and thus gave Soberal

free reign to enter into contracts predicated on forgery and fraud. Specifically, and

although StarTop has not shown it had any contemporaneous awareness of this,

StarTop contends that NICbyte became a “Defaulting Member” under the JVA due

to its asserted failure to make a required capital contribution. 144 Yet, even assuming

for the sake of argument that StarTop has standing to make this contention on behalf

142 Harmon v.State, Delaware Harness Racing Comm’n, 62 A.3d 1198, 1201 (Del.
2013) (quoting Restatement (Third) of Agency § 2.01 (2006)).

143 JVA § 6.5(a).

144 JVA § 3.4(a).

31
of Wishon Row, there is no evidence to suggest a default occurred. 145 StarTop

contends that Wishon Row submitted a capital call to NICbyte on October 3, 2022,

that was distinct from prior capital calls. But the capital call was instead the same

capital call for September 26, 2022, that Wishon Row ultimately withdrew. 146

In sum, the evidence, what little there is, does not show that NICbyte was in

default. Instead, I conclude Soberal plainly lacked the express authority to enter into

the loan documents.

C. Apparent Authority 147

I find that the record of spoliation warrants an adverse inference that there

was no apparent authority.

145 To reiterate, it is StarTop’s burden to prove its defense. Sanctions Order ¶ 4.c. (“On

issues and claims for which StarTop already bears the burden of proof, StarTop must prove
those issues and claims by clear and convincing evidence. This would include the following
issues raised in the pleadings: . . . c. BW Industries, Inc. former co-CEO Jake Soberal . . . had
actual authority to enter into the StarTop loans.”).

146 See TT 532:20–535:16 (McCormick); JX 374. Further, the entity that supposedly
made the call was managed by Soberal—a person with a proven record of fraud. Soberal did
not testify at trial, and there is no evidence StarTop ever knew about the supposed capital
call. I also note that StarTop claims the capital call was for tenant improvements, but even
that is highly suspect given the debt needs Wishon Row was concealing.

147 The Court’s analysis moves directly to StarTop’s arguments that Soberal had
apparent authority, and summarily addresses StarTop’s arguments of implied authority.
First, StarTop waived any argument that Soberal had implied authority by not raising the
argument in its post-trial briefs. Emerald P’rs v. Berlin, 726 A.2d 1215, 1224 (Del.
1999) (“Issues not briefed are deemed waived.”). Its argument for actual authority related
only to an argument based on express, not implied authority. Second, and in any event,
Plaintiffs quote from a Superior Court decision in Wilson v. Active Crane Rentals, Inc. that
“the determination of implied authority depends on the relationship between the principal
and agent, not what a third party believes about the relationship. That is, implied authority
is authority that the agent reasonably believes he has as a result of the principal’s actions.”
2004 WL 1732275, at *2 (Del. Super. July 8, 2004). Here, it was plainly not reasonable for
Soberal to believe that NICbyte or Bitwise had in any way implied authorization to enter the

32
Apparent authority is a means “to bind a principal for acts of its agent in

circumstances where the agent had no authority at all.” 148 Apparent authority “is

the power held by an agent or other actor to affect a principal’s legal relations with

third parties when a third party reasonably believes the actor has authority to act on

behalf of the principal and that belief is traceable to the principal’s

manifestations.” 149 “If a third party relies on this apparent authority in good faith

and is ‘justified in doing so by the surrounding circumstances,’ the principal is bound

to the same extent as if actual authority existed.” 150

Conversely, “[a]pparent authority ends when it is no longer reasonable for the

third party with whom an agent deals to believe that the agent continues to act with

actual authority.” 151 A third-party “will not be permitted to claim protection if he

ignores facts illustrating the agent’s lack of authority.” 152 “Apparent authority and

its effect vanish in the presence of the third party’s actual knowledge of the real scope

loan documents. If so, there would, for example, have been no reason for Soberal to falsify
any board consents or the JVA.

148 Rudnitsky v. Rudnitsky, 2000 WL 1724234, at *5 (Del. Ch. Nov. 14, 2000).

149 Vichi v. Koninklijke Philips Elecs., N.V., 85 A.3d 725, 799 (Del. Ch. 2014) (quoting

Restatement (Third) of Agency § 2.03 (2006)).

150 Caribbean Sun Airlines Inc. v. Halevi Enters. LLC, 339 A.3d 24, 35–36 (Del. 2025)

(citation omitted).

151 Restatement (Third) Of Agency § 3.11 (2006).

152 Vichi, 85 A.3d at 799 (citing Int’l Boiler Works Co. v. Gen. Waterworks Corp., 372

A.2d 176, 177 (Del.1977)); Rudnitsky, 2000 WL 1724234, at *6 (“It is an established principle
of Delaware law that apparent authority cannot be asserted by a party who knew, at the time
of the transaction, that the agent lacked actual authority.”).

33
of the agent’s authority, or knowledge of facts that would put the party on inquiry as

to the actual authority of the agent.” 153

First, I note that there is no basis in the record to find that StarTop could have

reasonably relied on Soberal’s confirmations of his authority to enter into the loan

documents. A reasonable person would have quickly suspected fraud in directly

dealing with Soberal. Soberal’s requests were always on short notice and urgent.

And the rates he offered were unusually high. Of course, Soberal suggested a thin

explanation for why he could not use the company’s own cash—purportedly tens of

millions of dollars—and instead needed to take out one short-term, very high interest

loan after another. But that was beside the point, as Hardcastle lauded in a message

to Adler: “[Soberal] always needs money. I think we’ll be making fees off BW for

many months to come.” 154

In addition, it became fairly obvious that Soberal was using the proceeds of the

new short-term, high-interest loans to make payments on the old short-term, high-

interest loans. Soberal paid off the First and Second 2112 Loans after receiving the

proceeds from the Third 2112 Loan. 155 Soberal paid off two loans from Hardcastle

and Adler once the Patrick Loan closed. 156 Then, more than half of the proceeds from

153 12 Williston on Contracts § 35:69 (4th ed.) § 35:69; see also id. § 35:70 (“[T]here is

no apparent authority when a third party has knowledge of facts which would put it on
inquiry as to the actual authority of the agent.”).

154 JX 584.

155 JX 299.

156 JX 468, 486, 491, 568.

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the second StarTop loan went to paying off the Patrick Loan. 157 An undeniable

pattern quickly emerged, in which Soberal would ask for more money only to make

payments on money he had already borrowed. And, to ward off any suspicions and

continue to attract investors, Hardcastle and Adler, in turn, added a “use of funds”

clause despite knowing that it was a farce. 158 Indeed, when Soberal wanted the

clause removed in the term sheet to investors, Hardcastle told Soberal: “[D]on’t worry

about that. We can’t tell where it’s going anyway. Just for our lenders in case they

ask.” 159

Other developments would have raised alarms. Soberal insisted on not

recording a deed of trust, or using a “balance sheet.” 160 He wanted to conceal the

security interest encumbering the Fresno Property, and at least based on the sparse

record, never gave Hardcastle any clear explanation as to why—only conclusory

statements that it added “complexity” to a sale of the real estate. 161 Patrick

Investments’ stark warning to “run away as fast as you can” was yet another

extraordinary warning of the risks associated with Soberal. 162

157 JX 956.

158 JX 591, 592.

159 JX 591, 592.

160 JX 258.

161 JX 419.

162 Although it did not ultimately deter Patrick Investments from entering into the

loan on amended terms, it is worth noting that Patrick Investments had limited visibility of
Soberal’s side of the deal and was relying on Hardcastle’s purported confidence in dealing

35
The documents that Soberal was forwarding, and that Hardcastle and Adler

sent to third-party investors, were suspect too. Soberal sent forged BW Industries

board consents that were electronically signed, but whose signatures were suspect.

For the board consents authorizing the first StarTop loan, Soberal redacted the lines

for the IP address and email address next to each director’s name to conceal that he

electronically forged their signatures. 163 And, in the board consents for the second

StarTop loan, Soberal removed an audit trail altogether. 164

On top of all this Hardcastle and Adler enlisted Soberal in fraudulent schemes

of their own. Hardcastle and Adler misrepresented the loan terms to their own

investors. Adler falsified and forged the term sheet and note. When investors began

asking questions about the interest rate, Hardcastle and Adler included Soberal on a

call specifically to justify and corroborate the falsely stated rate. Hardcastle and

Adler in turn pocketed yet more fees, netting more than $1.75 million via their

dealings with Soberal.

Thus, the evidentiary record, although heavily spoliated, shows that Soberal’s

statements and conduct would lead a reasonable person to question whether—and

almost certainly conclude that—fraud was omnipresent. Not only that but

with him. Patrick Investments apparently sought security for the loan via the Bakersfield
Properties and refused to continue with the deal unless the security interest was recorded.

163 JX 694, 724.

164 See JX 933.

36
Hardcastle and Adler were themselves engaged in fraudulent conduct for which they

enlisted Soberal’s help.

With such a record, it is a small step to infer that Hardcastle and Adler were

aware of Soberal’s lies. And yet, StarTop asks the Court to turn a blind eye to the

mass spoliation that has occurred and conclude that StarTop was defrauded itself,

even while engaging in fraud against others. Although StarTop destroyed a vast

trove of documents preventing Plaintiffs and the Court from determining with

precision what StarTop and its principals knew, given the stark absence and

unavailability of evidence arising from StarTop’s spoliation, on top of the unreliable

testimony of StarTop’s principals at trial, I am compelled to impose a further sanction

in the form of an adverse inference.

The Court does not take this step lightly. Under Rule 37(e), the Court may

“presume that [ ] lost information was unfavorable to the party” only if “ the party

acted recklessly or with the intent to deprive another party of the information’s use

in the litigation.” 165 An adverse inference “is appropriate where a litigant

intentionally or recklessly destroys evidence, when it knows that the item in question

is relevant to a legal dispute or it was otherwise under a legal duty to preserve the

165 Ct. Ch. R. 37(e).

37
item.” 166 The “known circumstances [must] reasonably admit” adopting “a view of

the facts as unfavorable to the wrongdoer.” 167

When Plaintiffs first moved for sanctions, the Court was rightly troubled by

the evidence of spoliation but believed a cautious approach was warranted. The Court

imposed an initial burden-shifting and burden-raising sanction but deferred until

after trial decision on whether additional sanctions were warranted. Although the

Court weighed whether a default judgment was warranted based on the intentional

destruction of evidence and resulting prejudice, here, the circumstances reasonably

admit adopting the view that no apparent authority existed. 168

First, StarTop’s principals intentionally destroyed evidence in this action.

Hardcastle and Adler knowingly deleted thousands of emails beginning at least by

November 13, 2023, several months after receiving the Litigation Hold. The

deletions coincided with NICbyte’s service of discovery requests and motion to compel.

Adler deleted more than 100,000 text messages during the Relevant Time Period that

have not been recovered. And that includes at a minimum messages that became

unrecoverable after receipt of the Litigation Hold and concerned the important time

166 Beard Rsch., Inc. v. Kates, 981 A.2d 1175, 1191 (Del. Ch. 2009) (citations omitted)

(citing Sears, Roebuck & Co. v. Midcap, 893 A.2d 542, 552 (Del. 2006)).

167 Equitable Tr. Co. v. Gallagher, 102 A.2d 538, 541 (Del. 1954).

168See Goldstein v. Denner, 310 A.3d 548, 557 (Del. Ch. 2024) (“To obtain a
presumption or a default judgment, the requesting party must show that the responding
party acted recklessly or with the intention of preventing another party from using the
evidence in litigation.”).

38
period following the second StarTop loan and around Bitwise’s payment defaults.169

Hardcastle and Adler further attempted to delete Dropbox files four times, including

the falsified term sheet from the first StarTop loan. 170 Adler and Hardcastle

communicated over Slack, but those messages are gone. 171 Hardcastle failed to

preserve data on his mobile device by not reconfiguring his retention settings after

he had received the Litigation Hold. 172 Hardcastle and Adler also likely deleted

material information before November, and it is only due to software limitations that

an audit trail of those deletions is unavailable.

Second, considering the limited documentary record that was preserved and

StarTop’s deficient and untimely productions, material gaps remain as to key fact

questions—and those gaps are in great part intentional, not accidental. Indeed,

Adler’s directive to Hardcastle to “not communicate with [Soberal] in writing

anymore . . . no text or email.” 173 seems to have been taken a step further, with the

intentional destruction of evidence continuing well after litigation began. Drawing

an adverse inference here is thus appropriate and compelled by the circumstances.

169 McClary Aff. ¶ 17.

170 See Report at 11. To be clear, these documents were recovered. The Court
discusses this particular (incompetent) attempt at spoliation to show that Hardcastle and
Adler were intentionally destroying information, and indeed were successful with other data
such as emails and texts.

171 See, e.g., JX 1009.

172 See JX 1136 (“Your obligation is not merely to avoid deleting files, but to take

affirmative steps to preserve relevant information and evidence, including making necessary
back-ups and suspending any regular document or file destruction practices.”).

173 JX 1081.

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The record of spoliation and cornucopia of red flags preceding the StarTop loan

transactions compel an adverse inference against StarTop that Soberal did not have

authority to enter into the StarTop loan documents, and that Hardcastle and Adler

knew it.

Third and finally, the limited record that remains points to a conclusion that

Hardcastle and Adler had actual knowledge of Soberal’s lack of authorization to enter

into the loans under the JVA. The JVA expressly prohibited Soberal from entering

into the loan transaction without NICbyte’s consent. Both the original and falsified

JVA were in the possession of StarTop. Even a cursory review of them would have

revealed the stark differences. The JVA was 45 pages and clearly revealed the

identity of NICbyte in the opening recitals. The falsified one was shortened to five

pages, and omitted NICbyte altogether. Furthermore, documentary evidence shows

Adler understood, or at least told investors he understood, the importance of the JVA

during the underwriting process. For example, on July 1, 2023, Adler wrote in an

email to an investor that the JVA “has been on [StarTop’s] radar since initial

underwriting.” 174

To be clear, the finding that no apparent authority exists is ultimately

predicated on the exercise of this Court’s discretion to impose an adverse inference

on sanctionable conduct arising from a vastly spoliated record. The Court need not

determine exactly what StarTop’s principals knew or did not know as to the

provisions of the JVA. Based on the multiple indicia of fraud and spoliation from the

174 See JX 1140.

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record, it is sufficient to impose an adverse inference against StarTop that Soberal

did not have apparent authority. Furthermore, StarTop has not shown that Soberal

had actual authority.

Plaintiffs are entitled to their requested declaratory relief that the StarTop

loan documents 175 are invalid and cancelled as they relate to any right to enforce

against Plaintiffs or the underlying properties. Furthermore, StarTop has no right,

title, or interest in the underlying properties, 176 nor any right, title, control or interest

in NIC Wise or NIC Wise’s subsidiaries. 177

D. Injunctive Relief

Although Plaintiffs did not brief their requests for relief, because of the original

spoliation ruling, StarTop bore the burden as to claims or elements for which

Plaintiffs initially had the burden of proof. 178 With that in mind, I consider whether

to grant Plaintiffs’ requested injunctive relief.

175 See PTO ¶ 107(b) (“The January 13, 2023 and March 15, 2023 Promissory Notes,

the loan modification cross-collateralizing the loans and upsizing the principal amount,
Pledge Agreements, the Deeds of Trust on the Plaintiff Subsidiaries’ Properties located at
1701 18th Street, Bakersfield, CA 29 93301, 1715 18th Street, Bakersfield, CA 93301, 1723
18th Street, Bakersfield, CA 93301, 747 R Street, Fresno, CA 93721, and any other loans,
promissory notes, deeds of trust, or pledge agreements whose existence and validity is alleged
by StarTop or its affiliates regarding NIC Wise, the Plaintiff Subsidiaries, or the Properties”).

176 Id. ¶ 107(c) (“(i) 1701 18th Street, Bakersfield, CA 93301; (ii) 1715 18th Street,

Bakersfield, CA 93301; (iii) 1723 18th Street, Bakersfield, CA 93301; and (iv) 747 R Street,
Fresno, CA 93721”).

177 Id. ¶ 107(d).

178 See Sanctions Order ¶ 3.

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Plaintiffs ask the Court to permanently enjoin Defendants from “interfering in

Plaintiffs’ operation or business in any way,” “asserting any rights or interests

supposedly derived from the fraudulently obtained and void loans, promissory notes,

deeds of trust, pledge agreements, or other accompanying loan documents to any

other person or entity, or in any other proceeding,” and “demanding substitution of

Duane Morris LLP as Plaintiffs’ counsel in any capacity or matter, or in any way

interfering with Duane Morris LLP’s representation of Plaintiffs.” 179

“A permanent injunction is a form of final relief that prohibits a party from

taking action or compels a party to take action.” 180 To obtain a permanent injunction,

a party ordinarily must show “(i) actual success on the merits; (ii) that it would suffer

irreparable harm if the injunction is not granted; and (iii) that the balance of the

equities favors it.” 181 The remedy requires a showing that other remedies are

inadequate. 182

Plaintiffs seek prohibitory injunctive relief. StarTop did not directly address

Plaintiffs’ entitlement to injunctive relief (or lack thereof) or elements (ii) and (iii) of

the analysis. Instead, StarTop sought to prove Plaintiffs’ lack of success on the merits,

which the Court addresses above. Accordingly, any arguments by StarTop as to

179 PTO ¶ 108.

180 Glob. Cap. Partners LLC v. Green Sapphire Holdings, Inc., 2026 WL 709819, at *45

(Del. Ch. Mar. 13, 2026).

181 Inre COVID-Related Restrictions on Religious Servs., 326 A.3d 626, 640 (Del.
2024)) (quotation omitted).

182 Glob. Cap. Partners LLC, 2026 WL 709819, at *45.

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irreparable harm or balancing of the equities are waived or otherwise fail consistent

with the Court’s prior spoliation order. Plaintiffs are plainly entitled to their

requested permanent injunctive relief consistent with this decision.

E. Rule 88 Affidavit in Relation to Plaintiffs’ Spoliation Motion

This Court granted Plaintiffs’ request for “fees and expenses . . . related to the

[spoliation motion,] . . . including expert fees, [and those from] drafting the original

motion papers and reply brief, in connection with the hearings on October 18, 2024

and February 18, 2025, the supplemental briefing, and the Special Discovery

Neutral’s investigation.” 183 StarTop opposes Plaintiffs’ request for fees on two

grounds: the billable rate of one of Plaintiffs’ counsel’s associates, and Plaintiffs’

forensic expert’s fees incurred after the spoliation hearing on October 14, 2024.

StarTop also objects to billing entries that it contends are outside of the scope of the

Court’s order.

In reviewing a fee application, Delaware courts “evaluate the reasonableness

of fees under the standards of Rule 1.5(a) of the Delaware Lawyers’ Rules of

Professional Conduct.” 184 “When awarding expenses as a contempt sanction or for

bad faith litigation tactics, this Court takes into account the remedial nature of the

183 Sanctions Order ¶ 5.

184 Carpenter v. Dinneen, 2008 WL 2950765, at *1 (Del. Ch. July 3, 2008).

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award.” 185 “Determining reasonableness does not require that this Court examine

individually each time entry and disbursement.” 186

Having considered the Rule 1.5(a) factors and the scope of the order, 187 I

conclude that the requested fee award is reasonable. The billable rate of the

identified associate is not unreasonable given the associate’s experience and relative

to the other (discounted) rates of counsel in this action. It was also not unreasonable

for Plaintiffs to engage the services of a forensic expert after the October hearing

given the initial evidence of spoliation. The expert provided additional services to the

Discovery Expert Neutral in helping frame the scope of the investigation, and he

further assisted Plaintiffs’ counsel in analyzing the information and data untimely

produced by StarTop.

Although StarTop does not identify the specific time entries it challenges, each

objection it raises relates to an entry that was either incurred as a result of or in

connection with the spoliation motion, related hearings, the supplemental briefing,

or the Special Discovery Neutral’s investigation. To be clear, Plaintiffs’ fee request

185 Aveta Inc. v. Bengoa, 2010 WL 3221823, at *6 (Del. Ch. Aug. 13, 2010).

186 Lynch v. Gonzalez, 2020 WL 5587716, at *2 (Del. Ch. Sept. 18, 2020), judgment

entered, (Del. Ch. 2020), aff’d, 253 A.3d 556 (Del. 2021).

187 Del. Lawyers’ R. Prof’l Conduct 1.5(a) (“(1) the time and labor required, the novelty

and difficulty of the questions involved, and the skill requisite to perform the legal service
properly; (2) the likelihood, if apparent to the client, that the acceptance of the particular
employment will preclude other employment by the lawyer; (3) the fee customarily charged
in the locality for similar legal services; (4) the amount involved and the results obtained; (5)
the time limitations imposed by the client or by circumstances; (6) the nature and length of
the professional relationship with the client; (7) the experience, reputation, and ability of the
lawyer or lawyers performing the services; and (8) whether the fee is fixed or contingent.”).

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for $423,781 is not a paltry sum. But in light of the wide-ranging evidence of

spoliation, StarTop’s counsel’s failure to account for the full extent of that spoliation

in the October hearing and the subsequent investigation, Plaintiffs’ fee request here

is not unreasonable. Accordingly, StarTop shall pay $423,781 in fees and expenses

to Plaintiffs within 30 days. 188

III. CONCLUSION

The parties are asked to submit a stipulated form of order implementing this

decision within ten business days and to submit a joint letter advising the Court of

any issues that may remain to be addressed.

188 Plaintiffs are entitled to no other award of fees and expenses, whether for sanctions

or under any enforceable fee-shifting provision. As to sanctions, the sanctions awarded are
enough. Ironically, Plaintiffs also seek to shift fees under the pledge agreements that they
are seeking to declare unenforceable. They cannot have it both ways. Their request for fee
and expenses apart from the spoliation motion is denied.

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