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Nearly three years ago, TechCrunch reported an alleged fraud by Mike Rothenberg, a self-proclaimed "millennial venture capitalist," who had made a name for himself not only by designating his company under the same name, but spending huge sums of money to entice founders of startups, including Napa Valley vineyard tours, luxury boxes at Golden State Warriors Games, and, more ground for the founders 'at the San Francisco Giants' baseball stadium, which then inspired a scene from HBO's Silicon Valley.
The Securities & Exchange Commission initially contacted Rothenberg in June 2016 and last August it was formally indicted for hijacking up to $ 7 million of its investor capital. He settled with the agency without making an admission of guilt and, as part of the settlement, he resigned from what was left of the company and agreed to be excluded from the brokerage activity and investment advice with the right to reapply after five years. .
Now comes the part of the money. Following a forensic audit conducted in partnership with the Deloitte accounting firm, the SEC seeks Rothenberg's impairment charges of $ 18.8 million and an additional civil fine of $ 9 million. The SEC also requests that Rothenberg be required to pay pre-judgment interest of $ 3,663,323.47.
How did it come to this calculation? According to a new complaint filed Wednesday, the SEC claims that Rothenberg has raised a net amount of about $ 45.9 million from six venture capital funds from at least 200 investors , but that he took from his capital "costs" far exceeded what his company was entitled to during the life of these funds, concealing these "misdeeds" by "modifying the accounting records to ensure that its misappropriation looks like an investment, concluding undisclosed transactions on paper with misappropriated currency and [f]to another to conceal previous misappropriations. "
In the end, Deloitte's review showed that Rothenberg had embezzled $ 18.8 million legitimately owned by Rothenberg Ventures, $ 3.8 million was transferred to Rothenberg personally; Of which $ 8.8 million was used to fund other entities under its control (including a motor racing team and a virtual reality studio); and $ 5.7 million of which was used to pay the corporation's expenses "in addition" to the management and administration fees to which it was entitled under its management contracts.
We reached out to Rothenberg this morning. He has not yet responded to our request to discuss development.
According to the ranking, he seems to have little room for maneuver. According to the SEC's complaint, the "Rothenberg judgment" agreed last summer left the monetary remedy to a court judgment, which provides that "Rothenberg accepts the facts alleged in the complaint as true, and does not dispute his responsibility for alleged violations, for the purposes of this motion and at any hearing of this motion. "
Meanwhile, the lawsuit contains some interesting nuggets, including an alleged maneuver in which Rothenberg raised $ 1.3 million to invest in the Unity gaming engine company but never actually bought any shares of the company , instead diverting capital to other entities. (He eventually paid back $ 1 million to an investor who had asked for it several times, but not the remaining $ 300,000.)
Rothenberg also sold a $ 5.4 million stake in the Robinhood stock trading company for $ 5.4 million, but rather than channeling revenue back to investors, he again directed the company. Money, including, of course, to pay a luxury suite during Golden State Warriors games for which he disbursed $ 136,000.
According to a particularly shocked Rothenberg investor, the SEC claims that Rothenberg has subsequently leased this box via an online marketplace that allows people to buy and sell suites in various sports and entertainment venues, receiving at least $ 56,000. of practice.
In an apparent effort to maintain his presence, Rothenberg also donated $ 30,000 to the Stanford University Sports Department (he attended the undergraduate at Stanford) and spent thousands of dollars on ballet tickets last year and early this year, says the SEC file.
No matter what happens next, Silicon Valley Bank is one of the small winners of the SEC's detailed findings. a sprawling company that has been aggressively courting the technology sector since its founding in 1983. Last year, while Rothenberg agreed to be excluded from the sector, he continued to demonstrate his innocence by taking action in court against SVB in order to "defend the interests of its funds and its investors," said the company in a statement. the weather.
The implication was that SVB was responsible for some of Rothenberg's problems because it did not properly transfer money to the correct accounts, but the SEC said SVB had been cheated, providing Rothenberg a line of $ 4 million credit after receiving documents.
The Harvard Business School is a loser, besides Rothenberg and the many people who now feel deceived by him. The reason: he used Rothenberg Ventures as a case study for students after Rothenberg graduated from the program. As we have already mentioned, this case study – funded by HBS before a rumor of a problem in the company – was co-written by two professors who had "a significant financial interest in Rothenberg Ventures", such as clearly indicates a program of studies. Footnote.
Presumably, these links gave confidence to at least some of the investors in Silicon Valley and elsewhere, who subsequently provided Rothenberg with money to invest on their behalf.
You can read below the SEC's 20-page request for refunds and penalties, as well as the 48-page report written by Gerry Fujimoto, Deloitte's Legal Accounting Partner.
SEC vs. Mike Rothenberg from TechCrunch on Scribd
Medico-legal report concerning Mike Rothenberg / Rothenberg Ventures from TechCrunch on Scribd
Sarah Perez, Technical Manager TechCrunch,
Top: Rothenberg Ventures during the better days.
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