[NEWS] The SEC wants disgraced VC Mike Rothenberg to cough up more than $30 million – Loganspace

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[NEWS] The SEC wants disgraced VC Mike Rothenberg to cough up more than $30 million – Loganspace


Almost three years ago, TechCrunch reported onsuspected frauddedicated by Mike Rothenberg, a self-described “millennial project capitalist” who’d made a title for himself no longer only byeponymously brandinghis project firm but forspending lavishlyto woo startup founders, alongside side on Napa Valley wine tours, at luxury containers at Golden Impart Warriors games and most famously, web hosting an annual “founder discipline day” on the San Francisco Giants’s baseball stadium that laterimpressed a scenewithin the HBO teach “Silicon Valley.”

The Securities & Change Commission had before the full lot reached out to Rothenberg in June of 2016 and by final August, he’d been formally charged for misappropriating as a lot as $7 million of his patrons’ capital. Hesettledwith the company with out making an act of contrition, and, as portion of the settlement, he stepped down from what used to be left of the firm and agreed to be barred from the brokerage and funding advisory industry with a prison to reapply after 5 years.

Now, comes the money portion. Following a forensic audit performed in partnership with the accounting firm Deloitte, the SEC is making an try to safe $18.8 million in disgorgement penalties from Rothenberg, and an additional $9 million civil penalty. The SEC is moreover asking that Rothenberg be forced to pay pre-judgment curiosity of $3,663,323.47.

How it arrived at that math: in accordance with a brand novel lawsuit filed on Wednesday, the SEC argues that Rothenberg raised a safe amount of roughly $forty five.9 million across six project funds from no longer no longer as a lot as 200 patrons, but that he took “charges” on their capital that some distance exceeded what his firm used to be entitled to all around the existence of these funds, holding up these “misdeeds” by “improving accounting entries to construct his misappropriation glimpse like investments, getting into into undisclosed transactions to paper over diverted money, and shuffling investments from one [f]und to some other to veil prior diversions.”

Indirectly, it says, Deloitte’s examination demonstrated that Rothenberg misappropriated $18.8 million that rightfully belong toRothenberg Ventures,$3.8 million of which used to be transferred to Rothenberg in my notion; $8.8 million of which used to be pale to fund diversified entities under his control (alongside side a automobile racing crew and a virtual reality studio); and $5.7 of which used to be pale to pay the firm’s charges “over and above” the management and administrative charges it used to be entitled to per its management agreements.

We reached out to Rothenberg this morning. He has no longer but spoke back to our put a question to to chat referring to the fashion.

It sounds from the filing like he won’t have mighty wiggle room. Per the SEC’s swimsuit, the “Rothenberg Judgment” agreed upon final summer left monetary relief to be decided by a court’s judgment, one which “provides that Rothenberg accepts the info alleged within the criticism as prison, and does no longer contest his prison responsibility for the violations alleged, for the capabilities of this motion and at any hearing on this motion.”

Within the length in-between, the lawsuit contains attention-grabbing nuggets, alongside side an alleged maneuver in which Rothenberg raised $1.3 million to make investments within the game engine firm Solidarity but by no map essentially sold shares within the firm, as a replacement diverting the capital to diversified entities. (He sooner or later paid lend a hand $1 million to one investor who over and over asked for the a compensation, but no longer the diversified $300,000.)

Rothenberg moreover supplied a stake within the inventory-trading firm Robinhood for $5.4 million, says the SEC, but in preference to funnel any proceeds to patrons, he all over again directed the money in other areas, alongside side, evidently, to pay for a luxury suite all over Golden Impart Warriors games for which he shelled out $136,000.

In a transfer that one Rothenberg investor finds in particular galling, the SEC claims that Rothenberg then turned spherical and rented that field through anon-line marketplacethat enables individuals to grab and sell suites at diversified sports and leisure venues, receiving no longer no longer as a lot as $56,000 from the put collectively.

In an obvious effort to decide on out up appearances, Rothenberg moreover gave $30,000 to the Stanford University Athletics Department (he attended Stanford as an undergrad) and spent hundreds of bucks on ballet tickets final year and early this year, says the SEC’s filing.

No matter what occurs next, one runt victor within the SEC’s detailed findings isSilicon Valley Financial institution,a sprawling enterprise that has aggressively courted the tech trade since its 1983 founding. Final year, on the a similar time that Rothenberg used to be agreeing to be barred from the trade, he made a persevered teach of his innocence by filing swimsuit against SVB to “vindicate the interests of its funds and patrons,” the firm said in an announcement on the time.

The implication used to be that SVB used to be at fault for some of Rothenberg’s woes since it had no longer successfully wired money to the ideal accounts, but the SEC says that SVB used to be defrauded, offering Rothenberg a $4 million line of credit rating after being presented with fabricated paperwork.

A loser — diversified than Rothenberg and the diversified individuals that now essentially feel cheated by him — is Harvard Enterprise College. The motive: it pale Rothenberg Ventures as a case survey for students after Rothenberg graduated from the program. Aswe’ve reported beforehand, that case survey — funded by HBS earlier than any hint of misfortune on the firm had surfaced  — used to be co-authored by two professors who had a “well-known monetary curiosity in Rothenberg Ventures,” as said prominently in a curriculum footnote.

Presumably, these ties gave self belief to no longer no longer as a lot as a few the patrons in Silicon Valley and in other areas who later supplied Rothenberg with money to make investments on their behalf.

You would read the SEC’s 20-web page motion for disgorgement and penalties under, alongside with the 48-web page file assembled by Deloitte’s forensic accounting partner, Gerry Fujimoto.

SEC vs. Mike RothenbergbyTechCrunchon Scribd

Forensic file re Mike Rothenberg/Rothenberg VenturesbyTechCrunchon Scribd

Additional reporting by TechCrunch’s Sarah Perez.

Above: Rothenberg Ventures all over better days.

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