SEC announces charges and settlement with San Francisco VC Michael Rothenberg

Michael
Rothenberg
Courtesy of Michael
Rothenberg

• The SEC announced charges and a settlement with Michael
  Rothenberg, the founder of Rothenberg Ventures.
• The SEC charged Rothenberg with overcharging investors
  to fund personal projects. Rothenberg did not admit or deny the
  allegations in the settlement.
• Rothenberg will be barred from the brokerage and
  investment advisory business for five years.

Michael Rothenberg, the founder of a flashy San Francisco VC firm
that imploded under a cloud of controversy in 2016, has
settled charges with federal regulators alleging that he
misappropriated millions of dollars from investors.

The SEC
announced on Monday  that it has charged Rothenberg with
overcharging investors to fund personal projects, including a
virtual reality company. The settlement includes barring
Rothenberg from the brokerage and investment advisory
business for five years, after which he will have a right to
apply again.

Rothenberg “misappropriated millions of dollars” from the
funds he raised from nearly 200 investors, including using an
estimated $7 million of “excess fees” spent to support his
personal business ventures and “
to pay for private
parties and events at high-end resorts and Bay Area sporting
arenas,” the SEC said in a press
release.
 

Rothenberg was not immediately available for
comment. 

The 34-year old founder of Rothenberg Ventures did not
admit or deny the SEC’s allegations in the settlement, which must
be approved by a federal district court. The amount of civil
penalties that Rothenberg could be on the hook for will be
decided by the court. 

“It’s refreshing to see a government agency function the
way it’s supposed to”

Rothenberg Ventures was a high-flying venture firm that publicly
imploded in 2016. It was known for its over-the-top parties and
spending — as well as its young, charismatic founder, Mike
Rothenberg. Back in 2016, the company admitted to its
investors that the Securities and Exchange Commission was looking
into the company, according
to an email obtained by Business Insider, 

On top of that, multiple employees filed wage complaints against
the company with the state of California, several people told
Business Insider, and they also cooperated with the SEC
investigation.

One of them who was involved in this process told us, “The
SEC was extremely professional and easy to work with. It’s
refreshing to see a government agency function the way it’s
supposed to.”

The firm, which had over $50 million under management, ran out of
operating money, and all its employees except its lawyer were
told they were put on “unpaid leave” a year ago, according to a
lengthy account
of the firm’s troubles on Backchannel.

Business Insider talked to several former employees of the
company who described their experiences with Rothenberg using
words like “charming” and “convincing,” “vengeful,” “a
messed-up human being,” “megalomaniac,” “master manipulator” and
“lack of empathy.”

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