Venture Capitalist Michael Rothenberg Faces 23 Criminal Fraud Charges

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Famed venture capitalist Michael Rothenberg is facing criminal charges for defrauding almost $20 million. Rothenberg’s crimes allegedly took place between 2013 and 2016 and include lying to banks and tricking investors out of money.

Who is Michael Rothenberg?

Michael Brent Rothenberg is the founder of Rothenberg Ventures, an investment firm located in San Francisco, California. From its headquarters in the world’s tech capital, the firm specializes in startup investments.

Since 2012, the firm has invested in over 100 fledgling companies, including the now-prosperous SpaceX, Robinhood, and Patreon. But the investment firm has been dogged by suspicions of fraud since 2016. The U.S. Securities and Exchange Commission (SEC) launched an investigation in 2018. By early 2020, the SEC deemed the firm “forfeited.” 

Rothenberg is especially notable in the industry due to his eccentric persona. He has thrown lavish parties, including one where he rented out all of Oracle Park, the home field of the San Francisco Giants. The over-the-top event left such a mark that the HBO sitcom Silicon Valley even parodied it.

The rogue investor has kept a low-profile since the initial charges in 2018.

Outline of Charges

The U.S. Attorney’s Office is charging Rothenberg with a whopping 23 crimes, including several acts of fraud. Central is the allegation that Rothenberg obtained $18.8 million illegally over the 4-year period. 

He allegedly charged his clients management fees that were far above the contractual amount they agreed to. He also misled or directly lied to a bank in order to receive a loan. On one occasion, he convinced a group of five investors to wire him $1.35 million, which he said he would use to buy shares in a startup. Instead, he kept the money for himself.

Almost all of the instances of fraud had the same motivation — hiding Rothenberg’s or his firm’s financial issues. Drew Olanoff, a former employee, described Rothenberg’s schemes as deeply complex and interwoven. He said, “I saw it unravel. And as it unraveled it became very clear: This was extremely complicated and complicated for a reason — to hide things.”

Rothenberg practiced a sort of financial sleight of hand, wherein he was constantly moving sums of money between investors, the firm, separate investments, and himself. Investigating the case purportedly took years due to this intricate web of transfers.

The house of cards began to crumble in 2016 when a newly-hired financial officer blew the whistle on the company and informed the SEC. In 2018, following this initial investigation, a federal judge banned Rothenberg from participating in the investment business for five years. He also had to pay $31 million in fees to cover the case.

More Serious Consequences

For someone as wealthy and powerful as Rothenberg, the prior charges weren’t very severe. The new case, however, includes criminal charges. This means potential prison time. Each wire-fraud charge could lead to a maximum sentence of 20 years. Each bank fraud charge could garner him up to 30 years in prison. And with 23 crimes in the charge, Rothenberg could be be looking at a lengthy prison sentence. Additionally, he could be compelled to pay up to $1 million for each count of bank fraud.

Rothenberg has been released by authorities on $250,000 bail. He will return to court on August 27th.