Yet another former Silicon Valley darling is convicted of investor fraud

Mike Rothenberg, a former VC known for hosting lavish parties, was convicted today on 21 counts for defrauding investors

This year will be remembered for a lot of things. Among them could be the growing number of stars in the startup world who were later convicted for defrauding investors. 

Roughly six months after Theranos founder Elizabeth Holmes headed to jail for four counts of wire fraud, and just two weeks after Sam Bankman-Fried was found guilty on seven counts of fraud and conspiracy for his role in the collapse of his crypto exchange, another former high-flier in the startup world, Mike Rothenberg, was today convicted on 21 counts, including bank fraud, false statements, four counts of money laundering, and 15 counts of wire fraud.

The verdict, delivered by a jury in Northern California, bookends a 10-year-long journey for Rothenberg, who burst onto the Bay Area scene in 2013 at age 27 with a $5 million fund and enough charm to persuade TechCrunch that his one-man firm was special enough to merit coverage.

The Austin native was a compelling subject. A self-described former math Olympian who attended Stanford before getting an MBA from Harvard Business School, Rothenberg reportedly started both a tutoring business and a real estate fund while still an undergrad. He also logged time at Bain & Co., seemingly setting himself up for a traditional career in finance or venture capital. Instead of trodding that well-worn path — he was reportedly offered at least one role at a hedge fund —  Rothenberg earned kudos for striking out on his own instead, and he leaned heavily into a narrative about himself as a relentless hustler who could relate to the founders he wanted to fund.

Rothenberg also found increasingly inventive ways to attract widespread attention to his relatively small shop, many of them centered on organizing expensive parties for founders. Indeed, one of these gatherings – an “annual” event held two years in a row at the ballpark where the San Francisco Giants play – inspired an episode of the HBO show “Silicon Valley.”

It also raised questions, including in a story by Bloomberg that dubbed him “the Valley’s party animal” while also observing that it wasn’t “entirely clear” how Rothenberg was funding it all. (TechCrunch was later told by sources that after the Bloomberg piece was published, Rothenberg sent two employees to SFO, purchasing them airline tickets so they could buy up its newsstand copies and keep them out of view.)

He never recovered. In 2018, he was formerly charged by the SEC for overcharging investors to fund personal projects; Rothenberg settled in 2019 with the agency, which sought tens of millions of dollars in disgorgement penalties (these were later backed up by a federal court ruling).

While still facing that mountain of civil penalties, Rothenberg was charged with fraud six months later by the DOJ, which would later lead to today’s outcome.

What comes next could be worse. While Rothenberg won’t be sentenced until March 1 of next year, in its 2019 press release about its action against Rothenberg,  the DOJ noted that each of its wire fraud charges carries “maximum statutory penalties of up to 20 years in prison, not more than three years supervised release, and a $250,000 fine.” It added that “two bank fraud charges” and “two false statement to a bank charges each carry a maximum of 30 years in prison, not more than five years supervised release, and a $1,000,000 fine.” The money laundering charges, it continued, “carry a penalty of imprisonment of not more than ten years, not more than three years of supervised release, and a fine of not more than twice the amount of the criminally derived property involved in the transaction at issue.”

Pictured above: a picture of Rothenberg Ventures during its heyday, with Rothenberg at center.