Mike Rothenberg, a former VC recognized for internet hosting lavish events, was convicted at this time on 21 counts for defrauding traders
This 12 months will be remembered for lots of issues. Amongst them may very well be the rising variety of stars within the startup world who have been later convicted for defrauding traders.
Roughly six months after Theranos founder Elizabeth Holmes headed to jail for 4 counts of wire fraud, and simply two weeks after Sam Bankman-Fried was discovered responsible on seven counts of fraud and conspiracy for his position within the collapse of his crypto trade, one other former high-flier within the startup world, Mike Rothenberg, was at this time convicted on 21 counts, together with financial institution fraud, false statements, 4 counts of cash laundering, and 15 counts of wire fraud.
The decision, delivered by a jury in Northern California, bookends a 10-year-long journey for Rothenberg, who burst onto the Bay Space scene in 2013 at age 27 with a $5 million fund and sufficient appeal to influence TechCrunch that his one-man agency was particular sufficient to benefit protection.
The Austin native was a compelling topic. A self-described former math Olympian who attended Stanford earlier than getting an MBA from Harvard Enterprise College, Rothenberg reportedly began each a tutoring enterprise and an actual property fund whereas nonetheless an undergrad. He additionally logged time at Bain & Co., seemingly setting himself up for a conventional profession in finance or enterprise capital. As an alternative of trodding that well-worn path — he was reportedly supplied not less than one position at a hedge fund — Rothenberg earned kudos for putting out on his personal as an alternative, and he leaned closely right into a narrative about himself as a relentless hustler who might relate to the founders he needed to fund.
Rothenberg additionally discovered more and more ingenious methods to draw widespread consideration to his comparatively small store, lots of them centered on organizing costly events for founders. Certainly, certainly one of these gatherings – an “annual” occasion held two years in a row on the ballpark the place the San Francisco Giants play – impressed an episode of the HBO present “Silicon Valley.”
It additionally raised questions, together with in a narrative by Bloomberg that dubbed him “the Valley’s social gathering animal” whereas additionally observing that it wasn’t “solely clear” how Rothenberg was funding all of it. (TechCrunch was later informed by sources that after the Bloomberg piece was printed, Rothenberg despatched two staff to SFO, buying them airline tickets so they might purchase up its newsstand copies and maintain them out of view.)
He by no means recovered. In 2018, he was previously charged by the SEC for overcharging traders to fund private initiatives; Rothenberg settled in 2019 with the company, which sought tens of tens of millions of {dollars} in disgorgement penalties (these have been later backed up by a federal courtroom ruling).
Whereas nonetheless going through that mountain of civil penalties, Rothenberg was charged with fraud six months later by the DOJ, which might later result in at this time’s consequence.
What comes subsequent may very well be worse. Whereas Rothenberg received’t be sentenced till March 1 of subsequent 12 months, in its 2019 press launch about its motion towards Rothenberg, the DOJ famous that every of its wire fraud costs carries “most statutory penalties of as much as 20 years in jail, no more than three years supervised launch, and a $250,000 high quality.” It added that “two financial institution fraud costs” and “two false assertion to a financial institution costs every carry a most of 30 years in jail, no more than 5 years supervised launch, and a $1,000,000 high quality.” The cash laundering costs, it continued, “carry a penalty of imprisonment of no more than ten years, no more than three years of supervised launch, and a high quality of no more than twice the quantity of the criminally derived property concerned within the transaction at subject.”
Pictured above: an image of Rothenberg Ventures throughout its heyday, with Rothenberg at heart.