Court Orders Technology Fund Adviser to Pay More Than $31 Million
Lit. Release No. 24714 / January 13, 2020
Securities and Exchange Commission v. Michael B. Rothenberg, Civil Action No. 3:18-cv-05080 (N.D. Cal., filed August 20, 2018)
On December 20, 2019, a federal district court 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 SEC's complaint, filed in August 2018 in San Francisco, California, alleged that Rothenberg marketed his advisory firm, Rothenberg Ventures LLC, as uniquely positioned to identify millennial entrepreneurs and invest in "frontier technology" companies. Rothenberg and his firm allegedly misappropriated millions of dollars from the firm's funds, 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.
Without admitting or denying the allegations in the complaint, Rothenberg previously consented to the entry of a final judgment enjoining him from violating the antifraud provisions of Sections 206(1), 206(2), and 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8 thereunder, which was approved by the court on October 17, 2018. Rothenberg 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 S. Tigar for the U.S. District Court for the Northern District of California granted the SEC's motion, ordering Rothenberg to pay disgorgement of $18,776,800, prejudgment interest of $3,663,323, and a civil penalty of $9,000,000.
The SEC's litigation was handled by Andrew Hefty, Marc Katz, and Susan LaMarca of the San Francisco office. The SEC's investigation was conducted by Eric Brooks, Michael Foley, and Ellen Chen, and was supervised by Jeremy Pendrey of the Enforcement Division's Asset Management Unit in the San Francisco Regional Office.