Former Silicon Valley darling convicted of investor fraud

This year has seen a rise in the number of startup stars being convicted for defrauding investors. Following the imprisonment of Theranos founder Elizabeth Holmes for wire fraud and Sam Bankman-Fried’s guilty verdict for fraud and conspiracy in the collapse of his crypto exchange, another former high-flyer, Mike Rothenberg, has been convicted on multiple counts including bank fraud, false statements, money laundering, and wire fraud.

A jury in Northern California delivered the verdict, marking the end of a 10-year journey for Rothenberg. Back in 2013, at the age of 27, Rothenberg burst onto the Bay Area scene with a $5 million fund and managed to capture attention with his charm, even persuading TechCrunch to cover his one-man firm. He had a compelling background, having been a math Olympian, attending Stanford, and earning an MBA from Harvard Business School. Instead of pursuing a traditional finance or venture capital career, Rothenberg chose to strike out on his own, presenting himself as a relentless hustler who understood the struggles of the founders he wanted to support.

Rothenberg’s approach included organizing expensive parties for founders as a way to attract attention to his small firm. One such gathering, held at the ballpark where the San Francisco Giants play, even inspired an episode of the HBO show “Silicon Valley.” However, these extravagant events raised questions about how Rothenberg was funding them, with Bloomberg dubbing him “the Valley’s party animal” and questioning the source of his funds.

In 2018, Rothenberg faced charges from the SEC for overcharging investors to finance personal projects. He settled with the agency in 2019, but the civil penalties sought by the SEC were later supported by a federal court ruling. Six months later, Rothenberg was charged with fraud by the DOJ, leading to his recent conviction.

The future looks bleak for Rothenberg, as he won’t be sentenced until March 1 of next year. The DOJ’s press release from 2019 stated that each wire fraud charge carries a maximum penalty of up to 20 years in prison, three years of supervised release, and a $250,000 fine. Additionally, the bank fraud and false statement charges carry a maximum penalty of 30 years in prison, five years of supervised release, and a $1,000,000 fine. The money laundering charges carry a penalty of up to ten years in prison, three years of supervised release, and a fine up to twice the amount involved in the transaction.

Rothenberg Ventures, once a prominent figure in the startup world, is now facing the consequences of its founder’s actions.