Former Silicon Valley Executive Misappropriated $19 Million in Investor Funds According to SEC

While unfortunate, fraud can occur in nearly any business. Funds designated for specific business use can be misappropriated and unnoticed for months or even years given the circumstances. Not even the higher-ups in Silicon Valley are immune to fraudulent activity, as recent Securities and Exchange Commission (SEC) findings in a case against a former venture capitalist show millions of dollars in fraudulent activity.

Though it has been a year since the SEC initially brought charges against former Silicon Valley venture capitalist Michael Rothenberg for misappropriating money from his investors, the SEC now says it has even more evidence against him. According to the report, Rothenberg fraudulently enriched himself by $18.8 million from his investors. Initially, it was alleged that he had only taken $7 million.

According to the SEC, the increased amount stems from Rothenberg continuing to divert funds to himself and private business interests during the initial investigation. In a court document filed on July 31, the SEC stated, “The very month he was informed of the SEC investigation, Rothenberg raised, and misappropriated, $1.3 million.” The commission goes on to allege that, “even as he negotiated a settlement with the SEC for Securities Fraud Liability, Rothenberg misappropriated millions of dollars.”

The SEC discovered Rothenberg arranged for the 2013 venture fund to sell an interest in the popular no-fee stock trading app startup Robinhood for $5.4 million in June of 2018. Robinhood has recently been valued at $7 billion.

The SEC alleges that instead of distributing the $5.4 million to the 2013 fund’s investors, Rothenberg transferred the money into other business interests, including using $136,000 to lease a Golden State Warriors luxury suite, which he then leased out to others, raising up to $56,000. Rothenberg also put $16,000 in his personal account, donated $30,000 to the Stanford University Athletics Department and even, “spent thousands of dollars on ballet tickets,” according to the SEC.

Eventually, Rothenberg would transfer $732,000 to the 2013 Fund, the SEC says, pointing out that this was $4.7 million shy of the $5.4 million collected from the original Robinhood stake he sold.

Just a year prior, the SEC’s case against Rothenberg centered on allegations he charged $7 million in “excess fees” to his investors. It was alleged Rothenberg spent the funds not just on personal interests, but also “to pay for private parties and events at high-end resorts and Bay Area sporting arenas,” according to the SEC.

Rothenberg’s startup company, Rothenberg Ventures, was a high-flying venture firm known for its over-the-top parties, spending, and its young, charismatic founder, Mike Rothenberg. The firm had over $50 million under management when it publicly imploded in 2016. It ran out of operating money and all employees except its lawyer were told they were put on “unpaid leave.”

Houston Fraud Attorneys

Most types of fraud are intentional, but fraud also occurs through reckless representations. Fraud is also sometimes referred to as “fraudulent misrepresentation” or “fraudulent inducement.” Allegations of fraud are extremely serious. If you believe your business could be the victim of fraudulent activity, contact the experienced fraud attorneys at Feldman and Feldman today.

A Multimillion Dollar Website and Breach of Contract

Almost every business needs a website. For some businesses, website functionality is crucial to generating revenue; and, most types of marketing (websites included) are expensive endeavors. But what if you paid $32 million for a website that didn’t meet your expectations? That’s exactly what happened to car rental giant Hertz, which is suing its former marketing company, Accenture LLP, for breach of contract.

Hertz engaged Accenture to create a new website and mobile applications. From 2016 to 2018, Hertz paid Accenture over $32 million, but Hertz claims it did not get the website and mobile apps it wanted. According to the lawsuit, Accenture did not develop medium sized displays for the new website and mobile apps. While desktop and mobile sized displays were created, tablet-sized displays were not. Hertz requested the website and apps be “responsive” meaning they would automatically resize for the device on which they are accessed, but the Accenture “demanded hundreds of thousands of dollars in additional fees to deliver the promised medium-sized layout.”

Hertz also claims Accenture failed to deliver website coding that was secure, which could make the website vulnerable to hackers. Possibly the largest problem with the website is that it wasn’t extensible, meaning it couldn’t be expanded to be used for Hertz’s global brand. Hertz asserts the decision to disregard extensibility was deliberate and made without Hertz’s knowledge or consent. A website that’s not extensible leaves Hertz needing to spend additional marketing dollars developing websites and apps for global use.

What may seem like a simple breach of contract dispute on the surface can actually become much more complex in the digital age. Websites and mobile apps are incredibly complicated. When companies enter into a contract that does not discuss the specifics of every aspect of the project, disputes can easily arise between the parties as to what is included in the scope of work. Digital assets like websites are presenting unique legal challenges. When contracts involving websites are not thoroughly drafted, there’s more than enough room for disputes.

Houston Contract Attorneys

At Feldman & Feldman, our Houston contract attorneys understand the complexities of drafting contracts involving websites. We also regularly represent individuals and business owners in breach of contract disputes involving intangible marketing materials. If you are involved in a breach of contract dispute, contact us today to schedule an appointment with one of our dedicated attorneys.

Neiman Marcus Facing Creditors In Court

The cost of litigation is a huge challenge for businesses of all sizes. Large companies can threaten litigation in an effort to force opposing parties to drop claims against them. This is not only an extremely unfair practice, but it is against Texas law. Retailer Neiman Marcus has been accused by creditors of filing frivolous lawsuits in an attempt to stifle legitimate claims made by creditors.

Neiman Marcus is over five billion dollars in debt, which has created a contentious fight between the retailer and its creditors, specifically Marble Ridge Capital. Creditors have accused Neiman Marcus of moving around its assets to protect them from creditors. Marble Ridge Capital filed a lawsuit against the company, which in turn filed a countersuit claiming Marble Ridge was spreading harmful and incorrect information about the company. Now, both companies are waiting for a judge to decide whether or not Neiman Marcus’s countersuit can be dismissed under Anti-SLAPP laws.

Anti-SLAPP laws are meant to protect individuals and companies from frivolous lawsuits. What makes the lawsuits against Neiman Marcus and Marble Ridge Capital interesting is that their outcome could set a precedent for future creditors and debtors. If debtors are allowed to bully their creditors by filing additional lawsuits, it could give debtors an unfair advantage.

Getting Help With Anti-SLAPP Lawsuits

Anti-SLAPP lawsuits exist to ensure individuals and companies with more resources don’t trample over the rights of others. No one should be able to use his or her power and influence to deny someone else’s day in court. At Feldman & Feldman, our attorneys are experienced at helping individuals and businesses fight against larger adversaries. We use Texas Anti-SLAPP laws to dismiss frivolous lawsuits that were only filed to intimidate our clients.

If you or your business needs help with a legal matter, do not wait to contact one of our experienced lawyers today. We have extensive experience in a wide array of litigation matters, and we can protect your interests. Our attorneys can craft a personalized and efficient strategy to obtain a successful resolution for your case. Call us today to schedule a consultation.