With DOJ charges, former VC Mike Rothenberg could now be facing serious jail time

With DOJ charges, former VC Mike Rothenberg could now be facing serious jail time

While many in Silicon Valley would possibly want to neglect about investor Mike Rothenberg roughly 4 years after his younger enterprise agency started to implode, his story remains to be being written, and the most recent chapter doesn’t bode effectively for the 36-year-old.

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

Now, the U.S. Department of Justice has introduced two prison wire fraud fees in opposition to him, fees that he made two false statements to a financial institution, and cash laundering fees, all of which might end in a really very long time in jail relying on how issues play out.

How lengthy, precisely? The DOJ says the the 2 financial institution fraud fees and the 2 false assertion to a financial institution fees “every carry a most of 30 years in jail, no more than 5 years supervised launch, and a $1,000,000 nice,” whereas the cash laundering fees “carry a penalty of imprisonment of no more than ten years, no more than three years of supervised launch, and a nice of no more than twice the quantity of the criminally derived property concerned within the transaction at subject.”

The injury completed within the transient lifetime of his enterprise outfit — even whereas understood in broad strokes by trade watchers – is slightly breathtaking. As laid out by the DOJ, Rothenberg raised and managed 4 funds between the inception of his agency, Rothenberg Ventures, in 2013 and 2016, and his prison actions started nearly instantly.

According to the DOJ’s fees, after closing that preliminary fund, he partially funded his personal capital dedication to the 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.

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That’s financial institution fraud. Yet in keeping with the DOJ, that was merely Rothenberg’s opening gambit.

The following yr, in 2015, Rothenberg “took extra cash in enterprise capital charges from one of many funds he was elevating and managing” and since he then “confronted a shortfall on the finish of the yr that he didn’t want to report back to his buyers,” he discovered an unlawful workaround. Specifically, alleges the DOJ, he “engaged in a scheme to defraud a financial institution by making false statements and misrepresentations to the financial institution with a view to receive a $four million line of credit score to pay again the fund from which he had taken extra charges.” The concept, says the DOJ, was to “deceive his buyers into believing the fund was well-managed,” which apparently labored on the time.

Of course, in actuality, Rothenberg was digging an ever greater gap for himself, suggests the DOJ. Meanwhile, he seemingly had appearances to maintain up. Which could possibly be why in February 2016,  in keeping 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 instantly right into a digital actuality content material manufacturing firm working as River Studios that Rothenberg contended he wholly owned.”

The DOJ says that that as a substitute, Rothenberg used most of it for functions having nothing to do with that manufacturing firm.

Rothenberg additionally — judging by the DOJ’s report — started 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 determined.

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

No inventory within the software program firm was ever bought, in keeping with the DOJ’s investigation. The company says Rothenberg additionally “induced investments in his RVMC-managed funds below the premise he would use the cash for investments in ‘frontier edge’ applied sciences and take solely sure restricted charges for the administration of the funds.” Instead, he “took extra charges than to which he was entitled and invested far much less of the cash he raised than the working agreements disclosed to the buyers contemplated.”

Altogether, says the DOJ, it has collected proof that Rothenberg fraudulently obtained a minimum of $18.eight million.

We’ve reached out to Rothenberg — who has persistently denied any wrongdoing — for remark. It isn’t the one dangerous information he has confronted currently, in any case.

Just seven months in the past, in December, Rothenberg was ordered to pay greater than $31 million in reference to the misappropriation of investor cash referring to an SEC criticism that alleged he misappropriated hundreds of thousands of {dollars} from his agency’s funds, then used the cash to assist private enterprise ventures.

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

All have been unbelievable developments in what was already an almost unbelievable story of obvious hubris and its penalties. Rothenberg had entered the enterprise scene with a splash, touchdown a function story in TechCrunch, in early 2013, and touting his connections and his youth — he was 27 on the time — as benefits he loved over older VCs who may not have a shot on the identical corporations.

Two years later, BusinessWeek dubbed him Silicon Valley’s “occasion animal,” as his agency turned famend within the Bay Area for “throwing bashes for entrepreneurs,” together with costly events at San Francisco’s Oracle Park baseball subject (identified on the time as AT&T Park). Rothenberg, a self-described former math Olympian who attended Stanford earlier than getting an MBA from Harvard Business School, mentioned on the time, “The method we construct a scalable community is by internet hosting numerous occasions.”

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

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


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