Former VC Mike Rothenberg, With DOJ Fees may Now be Dealing with Critical Jail Time


While many in Silicon Valley would possibly favor to overlook about investor Mike Rothenberg roughly 4 years after his young enterprise agency started to implode, his story is nonetheless being written, and the newest chapter doesn’t bode properly for the 36-year-old.

Whereas Rothenberg earlier tangled with the Securities & Exchange Commission and lost, it was a civil matter, if one that may hang-out him for the remainder of his life.

Now, the U.S. Division of Justice has introduced two legal wire fraud charges against him, charges that he made two false statements to a financial institution, and money laundering charges, all of which may lead to a really very long time in prison relying on how issues play out.

How long, exactly? The DOJ says the 2 financial institution fraud charges and the two false statements to bank charges “each carry a maximum of 30 years in prison, no more than 5 years supervised release, and a $1,000,000 fine,” whereas the money laundering charges “carry a penalty of imprisonment of no more than ten years, no more than three years of supervised launch, and a superb of not more than twice the amount of the criminally derived property involved in the transaction at concern.”

The harm accomplished within the transient lifetime of his enterprise outfit — even whereas understood in broad strokes by business watchers – is slightly breathtaking. As laid out by the DOJ, Rothenberg raised and managed 4 funds from the time he based his agency, Rothenberg Ventures,  in 2012, by means of 2016, and his legal actions started nearly instantly.

In accordance with the DOJ’s fees, after closing his preliminary fund, he partially funded his personal capital dedication to a second fund by making false statements about his wealth to his financial institution whereas refinancing his residence mortgage and whereas acquiring a $300,000 private mortgage, a few of which he poured within the fund.

That’s bank fraud. But according to the DOJ, that was merely Rothenberg’s opening gambit.

The next year, in 2015, Rothenberg “took excess money in venture capital charges from one of many funds he was elevating and managing” and since he then “confronted a shortfall on the finish of the year that he didn’t want to report back to his buyers,” he discovered an illegal workaround. Particularly, alleges the DOJ, he “engaged in a scheme to defraud a bank by making false statements and misrepresentations to the bank in order to obtain a $4 million line of credit to pay again the fund from which he had taken excess charges.”

The thought, says the DOJ, was to “deceive his investors into believing the fund was well-managed,” which apparently worked on the time.

After all, in actuality, Rothenberg was digging an ever-bigger hole for himself, suggests the DOJ. In the meantime, he seemingly had appearances to keep up. It may very well be why in February 2016, in accordance with the allegations laid out by the DOJ, he “engaged in a scheme to defraud an investor with respect to a $2 million funding that it believed it was making directly into a virtual reality content production company operating as River Studios that Rothenberg contended he wholly owned.”

The DOJ says that that instead, Rothenberg used most of it for functions having nothing to do with that production company.

Rothenberg additionally — judging by the DOJ’s report — began to throw warning to the wind, maybe as a result of he thought he would possibly get away with it or as a result of he was more and more desperate.

To wit, its complaint alleges that in July 2016, five months after defrauding that first investor, Rothenberg “engaged in a scheme to defraud as many as 5 separate buyers when he induced them to wire a total of $1.35 million under the premise of investing within the untraded inventory of a privately-held software program firm.” The grievance fees Rothenberg with “knowingly participating in a scheme to defraud one investor by representing to that group that its cash could be used to buy the software company’s shares. According to the grievance, on the identical day the money was wired, Rothenberg took the money from the bank account designed to make the investment and despatched it to RVMC’s fundamental working bank account, from which it was used for many functions.”

No inventory within the software company was ever bought, in accordance with the DOJ’s investigation. The agency says Rothenberg also “induced investments in his [funds] under the premise he would use the money for investments in ‘frontier edge’ technologies and take only certain restricted charges for the administration of the funds.” As an alternative, he “took extra fees than to which he was entitled and invested far much less of the money he raised than the working agreements disclosed to the buyers contemplated.”

Altogether, says the DOJ, it has collected evidence that Rothenberg fraudulently obtained no less than $18.8 million.

We’ve reached out to Rothenberg — who has consistently denied any wrongdoing — for remark. It isn’t the one bad news he has faced recently, in any case.

In January of this year, Rothenberg was ordered to pay more than $31 million relating to an SEC grievance that alleged he misappropriated millions of {dollars} from his agency’s funds, then used the money to help personal business ventures.

In October 2018, Rothenberg additionally agreed to be barred from the securities business with a proper to reapply after 5 years.

Two years later, BusinessWeek dubbed him Silicon Valley’s “party animal,” as his agency grew to become renowned within the Bay Space for “throwing bashes for entrepreneurs,” together with costly parties at San Francisco’s Oracle Park baseball field (recognized on the time as AT&T Park). Rothenberg, a self-described former math Olympian who attended Stanford earlier than getting an MBA from Harvard Enterprise College, stated on the time, “The way in which we construct a scalable community is by hosting a number of events.”

He appeared to dismiss questions on how they have been paid for, however he did inform BusinessWeek that he offered a few of the earliest funding to Robinhood, the stock-trading app that was most recently valued at $7.6 billion and whose cofounders and CEOs attended Stanford concurrently Rothenberg.

It was an auspicious begin, in brief. Alas, by the summer time of 2016, the agency’s staff have been scattering to the winds, and investigators have been starting to take notes.