The SEC has charged a former rising star VC, accusing him of 'misappropriating millions of dollars' and barred him for 5 years

• The SEC announced charges and a settlement with Michael Rothenberg, the founder of Rothenberg Ventures.
• The SEC charged Rothenberg with overcharging investors to fund personal projects. Rothenberg did not admit or deny the allegations in the settlement.
• Rothenberg will be barred from the brokerage and investment advisory business for five years.

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Michael Rothenberg, the founder of a flashy San Francisco VC firm that imploded under a cloud of controversy in 2016, has settled charges with federal regulators alleging that he misappropriated millions of dollars from investors.

The SEC announced on Monday  that it has charged Rothenberg with overcharging investors to fund personal projects, including a virtual reality company. The settlement includes barring Rothenberg from the brokerage and investment advisory business for five years, after which he will have a right to apply again.

Rothenberg "misappropriated millions of dollars" from the funds he raised from nearly 200 investors, including using an estimated $7 million of "excess fees" spent to support his personal business ventures and "to pay for private parties and events at high-end resorts and Bay Area sporting arenas," the SEC said in a press release. 

Rothenberg was not immediately available for comment. 

The 34-year old founder of Rothenberg Ventures did not admit or deny the SEC's allegations in the settlement, which must be approved by a federal district court. The amount of civil penalties that Rothenberg could be on the hook for will be decided by the court. 

"It's refreshing to see a government agency function the way it's supposed to"

Rothenberg Ventures was a high-flying venture firm that publicly imploded in 2016. It was known for its over-the-top parties and spending — as well as its young, charismatic founder, Mike Rothenberg. Back in 2016, the company admitted to its investors that the Securities and Exchange Commission was looking into the company, according to an email obtained by Business Insider, 

On top of that, multiple employees filed wage complaints against the company with the state of California, several people told Business Insider, and they also cooperated with the SEC investigation.

One of them who was involved in this process told us, "The SEC was extremely professional and easy to work with. It's refreshing to see a government agency function the way it's supposed to."

The firm, which had over $50 million under management, ran out of operating money, and all its employees except its lawyer were told they were put on "unpaid leave" a year ago, according to a lengthy account of the firm's troubles on Backchannel.

Business Insider talked to several former employees of the company who described their experiences with Rothenberg using words like "charming" and "convincing," "vengeful," "a messed-up human being," "megalomaniac," "master manipulator" and "lack of empathy."

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