Michael Brent Rothenberg, a former San Francisco venture capitalist who has been dubbed “Silicon Valley’s Party Animal” by Bloomberg, was convicted by a federal jury of wire fraud, money laundering, bank fraud, and making false statements to a bank, according to a press release from the United States Attorney’s Office Northern District of California.
Evidence introduced at the trial established that Mr. Rothenberg’s schemes resulted in approximately $18.8 million in missing money.
The prosecution is the result of a lengthy investigation by the Federal Bureau of Investigation and Internal Revenue Service–Criminal Investigation.
Evidence at trial showed that Mr. Rothenberg founded a venture capital management company, Rothenberg Ventures Management Company LLC (RVMC), which he used between 2012 and 2018 to raise and manage four annual venture capital funds. The purpose of the funds was to invest in Silicon Valley startup companies, particularly in the field of virtual reality technologies.
The jury found that Mr. Rothenberg committed wire fraud with respect to a number of investments from investors in two of the venture capital funds that he managed in 2015 and 2016.
The jury also found that Mr. Rothenberg committed wire fraud in February 2016 with respect to a $2 million investment made in a company that he owned named Bend Reality LLC, which did business as River Studios. He founded River Studios in approximately 2015 for the purpose of producing content for virtual reality headsets.
The evidence at trial showed that Mr. Rothenberg falsely told the investor of the $2 million that he had “self-funded” River Studios and that the investment money would be used for specific purposes, when in fact Mr. Rothenberg knew that he needed a large portion of that investment to pay back money he had misappropriated at the end of 2015 from two of the venture capital funds that he managed. The evidence showed that those repayments, in addition to other transactions, constituted instances of money laundering.
Throughout 2015 and 2016, Mr. Rothenberg told his employees, fund investors, and the investor into River Studios that River Studios had been “self-funded” by him and that no venture capital funds had been used to fund the operations of that company.
The evidence showed that Mr. Rothenberg used a large amount of venture capital fund money to pay for River Studios’s operations. The evidence also showed that Mr. Rothenberg routinely took excess fees from the venture capital funds that he managed throughout 2015 and 2016 and that investors’ funds were routinely used for other purposes, such as to pay for RVMC’s operating expenses and to secure a line of credit taken out from Silicon Valley Bank by RVMC in late 2015.
In relation to the line of credit RVMC obtained from Silicon Valley Bank, the jury found Mr. Rothenberg guilty of committing bank fraud. The evidence showed that, because of the excess money he took from one of the venture capital funds, Mr. Rothenberg faced a shortfall at the end of 2015 that he did not wish to report to his investors. Mr. Rothenberg then engaged in a scheme to defraud Silicon Valley Bank by making false statements and misrepresentations to the bank to obtain a $4 million line of credit to pay back the fund from which he had taken excess fees.
A federal grand jury indicted Mr. Rothenberg in August 2020, and he is currently on pretrial release after posting an unsecured bond. Mr. Rothenberg’s sentencing is scheduled for March 1, 2024.
Adding up all the charges, Mr. Rothenberg is facing a maximum penalty of 60 years’ imprisonment and a total of $1.5 million in fines.
Mr. Rothenberg came onto the Bay Area scene in 2013 at age 27 with a $5 million fund.
According to TechCrunch, Mr. Rothenberg claimed that the goal of his one-man firm was “to open up my network to the founders and be available as a sounding board for them while taking a fraction of the cap table space that larger investors take. My network is often complementary to the other investors on the cap table, as they are often older than the founders while I typically invest in founders around my age.”
Mr. Rothenberg, from the Austin Texas area, was a math olympian in high school before going to Stanford. There he ran the famed Entrepreneurial Thought Leaders seminar for two years and helped bring in people like Mark Zuckerberg, Marissa Mayer, Jim Breyer, and Reid Hoffman to speak to packed auditoriums of students and tech folk.
Mr. Rothenberg went on to obtain an MBA from Harvard Business School, and he started both a tutoring business and a real estate fund while still an undergrad. He also spent time at the Bain & Co. management consulting firm.
Rather than go for a traditional career in finance or venture capital, he decided to go out on his own instead. According to Bloomberg, he was a self-described “millennial venture capitalist” and thought himself relatable to the founders he wanted to fund.
His idea was that the best way for his venture firm to find promising startups and attract capital was to throw lots of parties for young technology workers.
According to Bloomberg, Rothenberg Ventures set out to make a name for itself by spending money for guests to do things like ride hot air balloons on wine tours of Napa Valley, eat at trendy restaurants in San Francisco, and have box seat tickets to Giants and Golden State Warriors games.
Mr. Rothenberg also held an event two years in a row at the San Francisco Giants ballpark, which inspired an episode of the HBO show “Silicon Valley.” The show’s co-creator Mike Judge shot a similar-looking scene for the second-season premiere.
