Former San Francisco Venture Capitalist Convicted Of Multiple Fraud And Money Laundering Charges

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Jury Concludes “Silicon Valley’s Party Animal” Michael Rothenberg Defrauded Investors of Millions of Dollars

Michael Brent Rothenberg, a former San Francisco venture capitalist once described in Bloomberg as “Silicon Valley’s Party Animal,” was convicted of wire fraud, money laundering, bank fraud, and making false statements to a bank by a federal jury, announced Criminal Division Chief Thomas C. Colthurst, Federal Bureau of Investigation Special Agent in Charge Robert Tripp, and Acting Special Agent in Charge of Internal Revenue Service- Criminal Investigation Mark Silva. The guilty verdicts followed a seven-week jury trial before the Hon. Jon S. Tigar, U.S. District Judge. All told, the evidence introduced at trial established that Rothenberg’s schemes resulted in approximately $18.8 million in missing money.

The jury found that Rothenberg, 39, 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. In addition, the jury found that Rothenberg committed wire fraud in February 2016 with respect to a $2 million investment made in a company he owned named Bend Reality LLC (which did business as River Studios), and that he thereafter committed money laundering by transferring a large portion of those proceeds through various bank accounts. Finally, the jury found the defendant guilty of committing bank fraud and making false statements to a bank in relation to a line of credit that Rothenberg obtained for his venture capital management company from Silicon Valley Bank in late 2015.

Evidence at trial showed that Rothenberg founded a venture capital management company, Rothenberg Ventures Management Company, LLC (“RVMC”), that 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 start-up companies, and particularly companies in the field of virtual reality technologies. The evidence also showed that in approximately 2015, Rothenberg founded River Studios for the purpose of producing content to be used in virtual reality headsets. The evidence presented at trial showed that, throughout 2015 and 2016, 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, however, that Rothenberg misappropriated a large amount of venture capital fund money to pay for River Studios’ operations during that period. In addition to using venture capital funds to pay for River Studios’ operations, the evidence also showed that 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 purposes other than as represented to fund investors, 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 addition to defrauding investors in two of the venture capital funds that he managed, the jury also found Rothenberg guilty of defrauding an investor with respect to a $2 million investment that the investor made into River Studios in February 2016. The evidence at trial showed that Rothenberg falsely told that investor that he had “self-funded” River Studios and that he falsely told that investor that its investment would be used for particular purposes, when, in fact, Rothenberg knew that he needed a large portion of that investor’s 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.

With respect to the line of credit RVMC obtained from Silicon Valley Bank, the evidence at trial showed that, because of the excess money he took from one of the venture capital funds, Rothenberg faced a shortfall at the end of 2015 that he did not wish to report to his investors. The evidence presented at trial showed that, accordingly, Rothenberg 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 Rothenberg in August 2020. He was charged with bank fraud, in violation of 18 U.S.C. § 1344; making false statements to a bank, in violation of 18 U.S.C. § 1014; wire fraud, in violation of 18 U.S.C. § 1343; and money laundering, in violation of 18 U.S.C. § 1957.

Rothenberg is currently on pretrial release pursuant to an unsecured bond. Judge Tigar scheduled Rothenberg’s sentencing hearing for March 1, 2024. The maximum statutory penalty for each count in violation of 18 U.S.C. § 1344 and 18 U.S.C. § 1014 is 30 years of imprisonment and a fine of $1,000,000. The maximum penalty for each count in violation of 18 U.S.C. § 1343 is 20 years of imprisonment and a fine of $250,000. The maximum penalty for each count in violation of 18 U.S.C. § 1957 is 10 years and a fine of $250,000. However, any sentence will be imposed by the court after consideration of the U.S. Sentencing Guidelines and the federal statute governing the imposition of a sentence, 18 U.S.C. § 3553.

Assistant U.S. Attorneys Kyle F. Waldinger, Nicholas J. Walsh, and Benjamin K. Kleinman are prosecuting the case with the assistance of Beth Margen, Megan Pagaduan, and Isabel Trevizo. The prosecution is the result of a lengthy investigation by the Federal Bureau of Investigation and Internal Revenue Service – Criminal Investigation.

This article was originally sourced from www.justice.gov