Michael B. Rothenberg, the famous San Francisco based tech fund adviser, has been ordered by a federal court to pay over $31 million as penalties for misappropriation of investor money through disgorgement and prejudgment interest. The Securities and Exchange Commission (SEC) had previously charged the tech fund adviser together with his firm, Rothenberg Ventures LLC, which Rothenberg promoted as a “uniquely positioned to identify millennial entrepreneurs” and as an opportunity to invest in the most promising frontier tech companies.
The SEC Allegations
Documents filed by the SEC showed that Rothenberg Ventures had close to 200 investors and over $64 of assets under the company’s management ready to be invested in the equity of potentially successful tech firms. According to the SEC, Rothenberg had created a plan to defraud both the funds they were managing and people who had invested in the funds. The tech fund adviser together with his company is alleged to have misappropriated millions of dollars which were used to fund personal ventures that Rothenberg claimed were self-funded. The SEC claims he used the funds to throw private parties and host events at the Bay Area sporting arena and other high-end exclusive resorts.
In its complaint, the SEC claimed Rothenberg and his firm ran a scheme that involved several deceptive acts such as spending venture capital funds before the money was owed to the company and spending more than they were expected to earn in the life of the funds. The SEC also accused the fund adviser of misappropriating investors’ money meant for a single investment fund and taking money from one of the venture capital funds to be used as collateral in a bank credit just to mentions a few of the many accusations.
Rothenberg did not admit or deny any of the allegations in the SEC complaint. He had even consented to a previous judgment on some violations of antifraud provisions in the laws of federal securities. He had also accepted a verdict that banned him from participating in the securities industry with the right to apply again after a period of five years. However, Rothenberg and the SEC allowed the court to decide on the question of monetary relief. The SEC had asked for over $31 million from Rothenberg for prejudgment interest and penalties among other claims.
Eventually, the Honorable Jon Tigar for the U.S District Court for the Northern District of California ruled in favor of the SEC and ordered Rothenberg to pay a civil penalty of $9 million, $3.7 in prejudgment interest, and $18.8 million in disgorgement.
About Michael B. Rothenberg
Mike Rothenberg established Rothenberg Ventures in 2012 while still at Harvard Business School with the goal of building communities and solving problems. For the first fund, he traversed across the country to raise $5 from 50 top CEOs and other company founders. According to statistics by Goldman Sachs, Pitchbook, and CB Insights, by the year 2017, Rothenberg Ventures had risen to become the highest-ranked Venture Capital company in the Frontier Technology and Virtual Reality sector.
Tom, aka T Rex, is seasoned financial pro that cut his teeth on the Chicago trading oil futures in 1995. In less than 3 years he bought his own seat and set up shop on the exchange. For the next 10 years Rex traded his own account and some institutional accounts. In 2017, he decided to move to Florida and focus on educating traders and writing for financial websites.