Venture capitalist, "Silicon Valley's party animal" Michael Brent Rothenberg convicted in $18 million bank fraud scheme
A former San Francisco venture capitalist was convicted by a federal jury Thursday of various charges for defrauding investors over $18 million in investments, federal prosecutors said.
Michael Brent Rothenberg, 39, was found guilty of wire fraud, money laundering, bank fraud, and making false statements to a bank, the U.S. Attorney's Office for the Northern District of California said in a statement.
Rothenberg, dubbed by some as "Silicon Valley's Party Animal," defrauded investors in two of the venture capital funds that he managed in 2015 and 2016, according to prosecutors. The jury found that he committed wire fraud in February 2016 linked to a $2 million investment made in a company he owned named Bend Reality LLC, and that he committed money laundering by transferring a large portion of those proceeds to various bank accounts.
Rothenberg also made false statements to a bank pertaining to a line of credit that he obtained for his venture capital management company from Silicon Valley Bank in late 2015, the U.S. Attorney's Office said.
According to prosecutors, Rothenberg used his firm, Rothenberg Ventures Management Company, to raise and manage four annual venture capital funds between 2012 and 2018. He intended to invest those funds in Silicon Valley startup companies, and companies in the field of virtual reality technologies.
In 2015, Rothenberg founded River Studios to produce content for virtual reality headsets. Throughout 2015 and 2016, he told his employees, fund investors, and the investor in River Studios that it had been "self-funded" by him and that no venture capital funds had been used to fund its operations, prosecutors said.
However, Rothenberg misused a large amount of venture capital fund money to pay for River Studios' operations during that period, according to prosecutors. The jury found out that he took excess fees from venture capital funds that he managed throughout 2015 and 2016 and that investors' funds were routinely used for other purposes, such as to pay for RVMC's operations and to secure the line of credit from Silicon Valley Bank.
According to prosecutors, Rothenberg faced a shortfall at the end of 2015 but had no intention to report it to his investors. The jury found that he gave false statements and misrepresentations to Silicon Valley Bank to obtain $4 million worth of credit to pay back the fund from which he had taken excess fees.
Rothenberg's sentencing will take place on March 1, 2024. He is on pretrial release after posting an unsecured bond.
Rothenberg is facing a maximum penalty of 60 years imprisonment and $1.5 million in fines, prosecutors said.