Mike Rothenberg, the former flying VC committed to taking the party to Silicon Valley, now must pay $ 31.4 million to settle a California Federal Court Decision in favor of the allegations of the Security and Exchange Commission.
TechCrunch considered Rothenberg a & # 39; virtual gatsby & # 39; in 2016, when we first broke the news about the fall from its venture capital firm, Rothenberg Ventures. It looked like he took it as a compliment, changing the instagram identifier to @virtualgatsby. In fact, the name seemed appropriate for a man who apparently lived a party lifestyle and spent a lot to attract founders of start-up companies – including taking part in wine tours through the Napa Valley, conducting a 'founders' field day & # 39; where he rented the entire San Francisco Giants & # 39; baseball stadium and spend unmatched for executive production an video for Coldplay.
But the party's life stopped when the top leadership jumped ship and the SEC started examining the books. The SEC formally accused Rothenberg in August 2018 of misappropriating millions of dollars in capital from its investors and channeling that money into his own bank account. Rothenberg sorted out with the SEC at the time and, as part of the deal, was prevented from operating for five years.
Rothenberg was arrested in several cases, including one from Transcend VR for fraud and breach of contract, which ended in a settlement. Another lawsuit between Rothenberg and his former CFO, David Haase, ended with Rothenberg being ordered to pay $ 166,000 in damages.
But there was more to come from the SEC, after a forensic audit in partnership with the company Deloitte, showing the misuse or misappropriation of US $ 18.8 million in financing investors. Under this examination, Deloitte it showed that Rothenberg had used the money personally, to promote his flashy lifestyle or for other extravagances, such as the creation of a race car team and a virtual reality studio. Rothenberg was ordered to pay the $ 18.8 million he received from investors, another $ 9 million in civil fines and another $ 3.7 million in interest.
Neither the SEC nor Rothenberg responded to comment. It is also important to note nso far, one of the charges has been criminal, but has been prosecuted in civil court, as the SEC does not deal with criminal cases.
For all these reasons, Rothenberg never admitted any guilt for his actions and it is important to note that, because of this, admitting any wrongdoing, he will be able to practice again after the bar is raised in five years. He also made some decent initial investments in startups like Robinhood and many sources of investors that TechCrunch spoke to over the years seemed quite loyal to him as an investor, despite the accusations, mass exodus of employees and implosion of funds that followed .
And it seems that this saga is not over yet. Rothenberg said Market Watch in a recent interview, he thought the decision was "historically excessive and vindictive and punitive", which he planned to appeal and sue Silicon Valley Bank, which Rothenberg used to channel various investments on the subject.
Rothenberg Ventures already action moved against Silicon Valley Bank in August 2018, the same day that the SEC filed formal charges against Rothenberg himself. On that Tuxedo, Rothenberg alleged negligence, fraud and deception on the part of the bank and sought a trial before the jury. Silicon Valley Bank said would defend against the case at the time.
We contacted Silicon Valley Bank and are waiting to hear back. The real question is: if Rothenberg returned to investing in Silicon Valley, would anyone still trust him?