Court Orders Tech Fund Adviser Charged by SEC to Pay More Than $31 Million
A federal district court has ordered San Francisco-based fund adviser Michael B. Rothenberg to pay more than $31 million in disgorgement, prejudgment interest, and penalties in connection with the misappropriation of investor money.
A federal district court has ordered San Francisco-based fund adviser Michael B. Rothenberg to pay more than $31 million in disgorgement, prejudgment interest, and penalties in connection with the misappropriation of investor money.
The Securities and Exchange Commission previously charged Rothenberg, an investment adviser, and his advisory firm, Rothenberg Ventures LLC, which he marketed as “uniquely positioned to identify millennial entrepreneurs and invest in ‘frontier technology’ companies.”
According to documents filed with the SEC, the venture capital funds have nearly 200 investors and more than $64 million of assets under management and were established to invest in the equity of early-stage technology companies.
The SEC claims that Rothenberg carried out an alleged scheme “to defraud both the venture capital funds they manage and the investors in those funds.” He and his firm allegedly misappropriated millions of dollars from the firm’s funds, which were used to support personal business ventures that he claimed were self-funded, and to pay for private parties and events at high-end resorts and Bay Area sporting arenas.
The SEC alleged in its complaint that the scheme included numerous deceptive acts, including taking fees from the venture capital funds before they were owed to the firm, taking fees in excess of what they could be entitled to earn over the entire life of the funds, misappropriating investor money intended for a single-investment fund, improperly using money from one of the venture capital funds to collateralize a bank line of credit, among other allegations.
Without admitting or denying the allegations in the complaint, Rothenberg previously consented to the entry of a final judgment enjoining him from violating certain antifraud provisions of federal securities laws. He also agreed to be barred from the securities industry with a right to reapply after five years.
Further, Rothenberg and the SEC agreed to have the court determine any monetary relief. The SEC sought more than $31 million from Rothenberg in disgorgement, prejudgment interest, and penalties.
The Honorable Jon Tigar for the U.S. District Court for the Northern District of California granted the SEC’s motion, ordering Rothenberg to pay $18.8 million in disgorgement, nearly $3.7 million in prejudgment interest, and a civil penalty of $9 million.
