While numerous in Silicon Valley might prefer to forget about investor Mike Rothenberg roughly four years after his young venture firm began to implode, his narration is still being written, and the latest chapter doesn’t bode well for the 36 -year-old.
While Rothenberg earlier intricate with the Insurance& Exchange Commission and lost, it was a civil matter, if one that could haunt him for the rest of his life.
Now, the U.S. Department of Justice has brought two criminal cable forgery attacks against him, prices that he made two false testimonies to a bank, and money cleaning bills, all of which could result in a very long time in prison depending on how things play out.
How long, accurately? The DOJ says the the two bank forgery accuses and the two false explanations to a bank bills” each carry a maximum period of 30 years in prison , not more than five years supervised exhaust, and a $1,000, 000 punishment ,” while the money laundering accuses” carry a penalty of imprisonment of not more than ten years , not more than three years of supervised freeing, and a punishment of not more than twice the amount of the criminally received dimension involved in the busines at issue .”
The damage done in the brief living for his go attire — even while understood in wide-ranging apoplexies by industry watchers- is rather breathtaking. As laid out by the DOJ, Rothenberg created and administered four stores from the time he founded his firm, Rothenberg Ventures, in 2012, through 2016, and his criminal activities began almost immediately.
According to the DOJ’s attacks, after closing his initial fund, he partially funded his own capital commitment to a second fund by making false affirmations about his capital to his bank while refinancing his home mortgage and while procuring a $300,000 personal loan, some of which he swarmed in the fund.
That’s bank fraud. Yet according to the DOJ, that was merely Rothenberg’s opening gambit.
The following year, in 2015, Rothenberg” made excess fund in risk capital fees from one of the funds he was raising and managing” and because he then” faced a shortfall at the end of the year that he did not wish to report to his investors ,” he found an illegal workaround. Specifically, alleges the DOJ, he” engaged in a scheme to defraud a bank by making false statements and misrepresentations to the bank in order to obtain a$ 4 million personal line of credit to pay back the fund from which he had taken excess fees .”
The idea, says the DOJ, was to” deceive his investors into believing the fund was well-managed ,” which apparently toiled at the time.
Of course, in reality, Rothenberg was digging an ever bigger hole for himself, recommends the DOJ. Meanwhile, he apparently had appearances to keep up. It could be why in February 2016, according to the allegations laid out by the DOJ, he” engaged in a scheme to defraud an investor with respect to a$ two million investment that it believed it was constituting directly into a virtual reality content production company operating as River Studios that Rothenberg postulated he wholly owned .”
The DOJ says that that instead, Rothenberg worked the majority of members of it for purposes having nothing to do with that yield company.
Rothenberg likewise — guessing by the DOJ’s report — began to throw caution to the wind, perhaps because he thought he might get away with it or because he was increasingly desperate.
To wit, its complaint alleges that in July 2016, five months after defrauding that first investor, Rothenberg” actively engaged in a scheme to defraud as numerous as five separate investors where reference is induced them to wire a total of $1.35 million under the premise of investing in the untraded stock of a privately-held software company .” The complaint bills Rothenberg with” knowingly engaging in a scheme to defraud one investor by representing to that organization that its money would be used to purchase the software company’s shares. Harmonizing to the complaint, on the same day the money was cabled, Rothenberg made the money from the bank account designed to realize the speculation and mail it to RVMC’s main operating bank account, from which it was used for many purposes .”
No stock in the software corporation was ever purchased, according to the DOJ’s investigation. The enterprise says Rothenberg also” generated investments in his[ funds] under the premise he would use the money for investments in’ frontier line’ engineerings and take only specific limited costs for the management of the funds .” Instead, he” made more costs than to which he was entitled and gave far less of the money he promoted than the operating agreements disclosed to the investors foresaw .”
Altogether, says the DOJ, it has mustered evidence that Rothenberg fraudulently obtained at least $18.8 million.
We’ve reached out to Rothenberg — who has consistently revoked any misbehavior — for statement. It isn’t the only bad news he has faced lately, in any case.
In January of this year, Rothenberg was ordered to pay more than $31 million relating to an SEC complaint that alleged he misappropriated millions of dollars from his firm’s funds, then expended the money to support personal business ventures.
In October 2018, Rothenberg too agreed to be forbade from the securities industry with a claim to reapply after five years.
All have been incredible developments in what was already a roughly fabulous legend of hubris and its consequences. Rothenberg had entered the venture scene with a splash, mooring a feature story in TechCrunch, in early 2013, and touting his acquaintances and his youth — he was 27 at the time — as advantages he experienced over older VCs who might not have a shot at the same companies.
Two years later, BusinessWeek dubbed him Silicon Valley’s” party animal ,” as his firm became renowned in the Bay Area for” propelling bashes for entrepreneurs ,” including expensive parties at San Francisco’s Oracle Park baseball field( known at the time as AT& T Park ). Rothenberg, a self-described former math Olympian who attended Stanford before going an MBA from Harvard Business School, said at the time, “The way we build a scalable network is by hosting a lot of events.”
He seemed to dismiss a matter of how they were paid for, but he did tell BusinessWeek that he added some 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 at the same time as Rothenberg.
It was an auspicious start, in short. Alas, by the summer of 2016, the firm’s employees were sowing to the winds, and sleuths were beginning to take notes.