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The Securities and Exchange Commission todaycharged the founder of San Francisco-based venture capital funds and his investment advisory firm with overcharging investors to fund personal projects, including sending millions of dollars to his own virtual reality production company.

The SECs complaint alleges that Michael B. Rothenberg, 34, marketed his advisory firm, Rothenberg Ventures LLC, asuniquely positioned to identify millennial entrepreneurs and invest in frontier technology companies. According to SEC filings, Rothenbergs funds had nearly 200 investors and more than $64 million in assets. The SECs complaint alleges that over a three-year period, Rothenberg and his firm misappropriated millions of dollars from the funds, including an estimated $7 million of excess fees, which Rothenberg used to support personal business ventures he claimed were self-funded and to pay for private parties and events at high-end resorts and Bay Area sporting arenas.

Venture capital investors provide important funding for start-ups but there are risks, including potential harm to investors from unscrupulous managers who defraud them, as we allege Rothenberg did in this case, said C. Dabney ORiordan, Co-Chief of the Enforcement Divisions Asset Management Unit.

Without admitting or denying the allegations in the SECs complaint, Rothenberg and Rothenberg Ventures agreed to settle the charges. The settlement is subject to approval by the federal district court for the Northern District of California which would determine the amount of disgorgement and civil money penalties. Rothenberg also agreed to be barred from the brokerage and investment advisory business with a right to reapply after five years. An SEC order imposing the bar will be instituted following court approval of the settlement.

The SECs investigation was conducted by Eric Brooks, Michael Foley, and Ellen Chen, and was supervised by Jeremy Pendrey of the Enforcement Divisions Asset Management Unit in the San Francisco Regional Office.The SECs litigation to determine the amount of disgorgement, prejudgment interest, and penalties, will be led by Barrett Atwood and Andrew Hefty of the San Francisco office.

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Michael Blair
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20.08.2018 (20.08.2018)
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