Entirely, says the DOJ, it has collected proof that Rothenberg fraudulently got at least $18.8 million.
All have been extraordinary advancements in what was already a nearly astounding story of hubris and its repercussions. Rothenberg had gotten in the venture scene with a splash, landing a function story in TechCrunch, in early 2013, and promoting his connections and his youth– he was 27 at the time– as advantages he enjoyed over older VCs who may not have a shot at the very same business.
Rothenberg also– evaluating by the DOJs report– began to toss caution to the wind, perhaps due to the fact that he believed he may get away with it or since he was increasingly desperate.
The following year, in 2015, Rothenberg “took excess money in equity capital costs from one of the funds he was managing and raising” and since he then “faced a deficiency at the end of the year that he did not wish to report to his financiers,” he found an unlawful workaround. Specifically, declares the DOJ, he “engaged in a plan to defraud a bank by making incorrect statements and misstatements to the bank in order to acquire a $4 million line of credit to repay the fund from which he had taken excess fees.”
No stock in the software business was ever bought, according to the DOJs investigation.
Of course, in truth, Rothenberg was digging an ever bigger hole for himself, recommends the DOJ. It could be why in February 2016, according to the claims laid out by the DOJ, he “engaged in a scheme to defraud a financier with respect to a $2 million financial investment that it believed it was making directly into a virtual truth material production business running as River Studios that Rothenberg contended he completely owned.”
While Rothenberg previously tangled with the Securities & & Exchange Commission and lost, it was a civil matter, if one that might haunt him for the rest of his life.
He appeared to dismiss questions about how they were paid for, however he did tell BusinessWeek that he provided some of the earliest funding to Robinhood, the stock-trading app that was most just recently valued at $7.6 billion and whose ceos and cofounders participated in Stanford at the very same time as Rothenberg.
It was an auspicious start, simply put. Alas, by the summer of 2016, the companys workers were scattering to the winds, and private investigators were beginning to take notes.
While many in Silicon Valley may prefer to forget about investor Mike Rothenberg roughly 4 years after his young endeavor firm started to implode, his story is still being written, and the newest chapter doesnt bode well for the 36-year-old.
Now, the U.S. Department of Justice has brought 2 criminal wire fraud charges against him, charges that he made 2 incorrect declarations to a bank, and cash laundering charges, all of which might lead to a long time in jail depending on how things play out.
No stock in the software business was ever bought, according to the DOJs examination. Instead, he “took more fees than to which he was entitled and invested far less of the cash he raised than the operating agreements disclosed to the financiers contemplated.”
Weve connected to Rothenberg– who has actually consistently denied any misbehavior– for comment. It isnt the only problem he has actually faced recently, in any case.
Of course, in reality, Rothenberg was digging an ever bigger hole for himself, recommends the DOJ. Meanwhile, he apparently had looks to maintain. It might be why in February 2016, according to the claims set out by the DOJ, he “engaged in a scheme to defraud an investor with respect to a $2 million financial investment that it thought it was making straight into a virtual reality material production company operating as River Studios that Rothenberg competed he entirely owned.”
Two years later, BusinessWeek called him Silicon Valleys “party animal,” as his company became prominent in the Bay Area for “throwing celebrations for entrepreneurs,” consisting of expensive celebrations at San Franciscos Oracle Park ball park (known at the time as AT&T Park). Rothenberg, a self-described former math Olympian who attended Stanford prior to getting an MBA from Harvard Business School, said at the time, “The method we build a scalable network is by hosting a great deal of occasions.”
The DOJ says that instead, Rothenberg used many of it for functions having nothing to do with that production business.
According to the DOJs charges, after closing his initial fund, he partly moneyed his own capital commitment to a 2nd fund by making false declarations about his wealth to his bank while re-financing his home mortgage and while getting a $300,000 individual loan, a few of which he put in the fund.
The damage performed in the quick life of his endeavor clothing– even while understood in broad strokes by market watchers– is rather breathtaking. As laid out by the DOJ, Rothenberg handled and raised 4 funds from the time he established his firm, Rothenberg Ventures, in 2012, through 2016, and his criminal activities began nearly immediately.
Thats bank scams. Yet according to the DOJ, that was simply Rothenbergs opening gambit.
In October 2018, Rothenberg likewise accepted be barred from the securities industry with a right to reapply after 5 years.
In January of this year, Rothenberg was bought to pay more than $31 million connecting to an SEC problem that declared he misused countless dollars from his firms funds, then used the money to support individual service ventures.
The concept, says the DOJ, was to “deceive his investors into thinking the fund was well-managed,” which obviously operated at the time.
How long, exactly? The DOJ states the 2 bank scams charges and the 2 incorrect statements to a bank charges “each carry an optimum of 30 years in jail, not more than 5 years monitored release, and a $1,000,000 fine,” while the cash laundering charges “bring a charge of imprisonment of not more than 10 years, not more than 3 years of supervised release, and a fine of not more than two times the quantity of the criminally derived residential or commercial property involved in the deal at concern.”
To wit, its problem alleges that in July 2016, 5 months after defrauding that very first investor, Rothenberg “took part in a plan to defraud as many as five separate financiers when he induced them to wire a total of $1.35 million under the premise of investing in the untraded stock of a privately-held software application business.” The complaint charges Rothenberg with “intentionally participating in a scheme to defraud one financier by representing to that company that its cash would be used to purchase the software application companys shares. According to the grievance, on the same day the money was wired, Rothenberg took the cash from the checking account designed to make the financial investment and sent it to RVMCs main operating savings account, from which it was used for numerous functions.”
The grievance charges Rothenberg with “intentionally engaging in a scheme to defraud one financier by representing to that company that its money would be utilized to purchase the software companys shares. According to the problem, on the exact same day the money was wired, Rothenberg took the cash from the bank account designed to make the financial investment and sent it to RVMCs main operating bank account, from which it was used for lots of purposes.”
