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Michael RothenbergCourtesy of Michael Rothenberg
- In a recent legal deposit, the SEC alleged Silicon Valley's former VC, Mike Rothenberg, had hijacked about $ 19 million in investor funds.
- The filing comes one year after Rothenberg settled the SEC's allegations that it had embezzled funds from investors in a transaction that prohibited Rothenberg from investing and brokerage for five years.
- According to the SEC's new record, Rothenberg embezzled funds even though he was negotiating with the agency about the first allegations.
- The SEC wants the court to order Rothenberg to pay more than $ 30 million, including a civil fine of $ 9 million.
- Visit the Business Insider home page for more stories.
Nearly a year after the Securities and Exchange Commission had declared that it was accusing Michael Rothenberg, a top-flight venture capitalist, of "misappropriating" money from its investors, the SEC declares have more evidence against him.
The SEC now claims that Rothenberg fraudulently added $ 18.8 million to its investors, up from $ 7 million originally released.
The highest figure is partly due to the fact that the SEC claims that it has continued to divert funds to itself and its private business interests even during the investigations.
"The same month he was informed of the SEC's investigation, Rothenberg collected and misappropriated $ 1.3 million," the SEC said in a document filed on July 31.
The commission goes on to claim that "even when negotiating a settlement with the SEC for liability for securities fraud, Rothenberg had embezzled millions of dollars".
As she was browsing through her financial records, she learned that Rothenberg had arranged for the 2013 venture capital fund to sell a $ 5.4 million stake in Robinhood on June 12, 2018. Robinhood is the start-up up-to-date application free of charge recently valued at $ 7 billion.
Instead of distributing the $ 5.4 million to investors in the 2013 fund, the SEC nevertheless transferred the money to other commercial interests, including $ 136,000 to rent a Golden State luxury suite. Warriors. Rothenberg then rented this suite to other people by collecting $ 56,000, according to the documents.
He put $ 16,000 on his personal account, donated $ 30,000 to the sports department of Stanford University and "spent thousands of dollars on ballet tickets," said the SEC.
Finally, he transferred $ 732,000 to the 2013 fund, said the SEC, pointing out that this represented $ 4.7 million, or $ 5.4 million from the Robinhood stake that he sold.
The SEC also portrays the image of a VC that charged its investors excessive fees for 2013 "and then turned to simply transferring money to itself or to its own company, rather than taking holdings in startups, as a venture capital fund is designed to do:
"A detailed badysis by the SEC forensic expert shows that Rothenberg ultimately embezzled about $ 18.8 million rightfully owned by the Funds, almost all of which was (i) transferred to Rothenberg personally (approximately $ 3.8 million), (ii) used to fund other entities controlled by Rothenberg (approximately $ 8.8 million) and (iii) used RVMC fees (Rothenberg Ventures LLC) in addition to the management and administration fees to which RVMC was entitled under the management contracts (approximately $ 5.7 million). "
A year ago, the SEC's affair against Rothenberg was based on allegations that it would have charged about $ 7 million of "excess fees" to its investors.
The SEC claimed that Rothenberg had spent this not only for his personal activities, but also "to pay for parties and private events at upscale resorts and sports arenas in the Bay Area," said the SEC in a press release at the time.
In addition to the fact that the amount of the refund more than doubled to nearly $ 19 million, the SEC also asked the court to fine Rothenberg by more than $ 3.6 million and to pay $ 9 million. additional dollars in punitive fees "reflecting his fraud, deception and irresponsible indifference to regulation."
Rothenberg was 34 years old when he first agreed to a settlement agreement with the SEC last year and he neither admitted nor denied the SEC's allegations in the settlement.
Rothenberg Ventures was a top-flight company known for its exceptional celebrations and spending, as well as for its charismatic young founder, Mike Rothenberg.
The company was managing more than US $ 50 million during its public implosion in 2016.
He no longer had any operating money and all his employees, except his lawyer, had been on "leave without pay".
She later admitted to her investors that the SEC was investigating, according to an email obtained by Business Insider. Several employees have filed salary complaints against the company with the state of California, several people told Business Insider.
Business Insider spoke to several former employees of the company who described their experiences with Rothenberg using terms such as "charming" and "compelling", "avenger", "a messed up human being", "megalomaniac", "master manipulator" "and" lack of empathy. "
Rothenberg did not immediately respond to a request for comment. His lawyer in February told Business Insider that he no longer represented Rothenberg.
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