Rothenberg Ventures didn’t waste any time with the red flags, Francisco Riordan says. During Riordan’s first week working on the website for the San Francisco company, known to Silicon Valley startups for its over-the-top spending on parties and perks, Rothenberg’s finance director resigned with no explanation.
That was February 2016. By July, Riordan says, he’d downloaded emails, financial reports, and other records from the network that he says showed the company’s namesake, Chief Executive Officer Mike Rothenberg, was using investor money to fund other projects he owned—projects the investors hadn’t agreed to support. “It just kept escalating and escalating,” says Riordan, 28, who’s featured in the latest episode of the Decrypted podcast. So he contacted the U.S. Securities and Exchange Commission.
For a week, he continued working as if everything was normal while sharing information with an SEC attorney. Then he got a text message from Rothenberg Ventures’ chief operating officer asking for help with a computer problem. Riordan says that when he arrived at the COO’s office, the company’s top lawyer was also there and asked if he’d shared anything with the government. “I said, ‘I’m not going to answer that,’ ” Riordan recalls. “Then he said, ‘Well, you’re terminated, effective immediately.’ ” Rothenberg Ventures says that by then Riordan had already given notice he was quitting and the company simply accelerated the process. Riordan denies that.
Records, pending lawsuits, media reports, and interviews with former employees echo Riordan’s allegations. Screen shots of bank records appear to show funds being moved between businesses. A plaintiff who invested $2 million with the firm alleges Rothenberg used the money inappropriately. An employee lawsuit alleges Rothenberg used the fund to support a lavish lifestyle. Riordan’s firing followed a note Rothenberg Ventures executives received from the SEC instructing them not to delete any documents pending an investigation. Former staffers say Rothenberg hasn’t fully paid them for their work, and American Express Co. is suing for payment of overdue credit card bills.
Rothenberg himself could face fines if found to have engaged in self-dealing, though jail time would be unlikely, says Andrew Tuch, a law professor at Washington University in St. Louis who specializes in governance. “Self-dealing is a basic conflict of interest, and courts are pretty strict on that,” he says.
“Rothenberg Ventures is cooperating with the SEC and believes that all matters will be resolved in an acceptable manner,” a spokesman said in a statement. Rothenberg declined to comment, but in a Facebook Live video posted earlier this year, he denied wrongdoing, including misusing investor money, and attributed his problems to sensational media coverage.
Rothenberg’s staff included frat brothers from Stanford, and he was known for buying luxury boxes at concerts and high-profile sporting events, sponsoring auto racing, supplying virtual-reality headsets at parties he threw for minor celebrities, organizing puppy-petting parties, even renting out San Francisco’s AT&T Park, where the Giants play. “He just liked to stroke his own ego,” Riordan says. “He broke a lot of lives.”
Riordan says he had fun in the luxury boxes but felt compelled to disclose what he viewed as the deception of employees and investors. Employees can serve as an important check on their companies, he says, citing the role former Uber Technologies engineer Susan Fowler played in highlighting the company’s troubled culture. “People are getting more fed up with mistreatment,” he says. “I feel like Silicon Valley is more unethical now than it was a few years ago. People are responding to that.”
Riordan is trying to start a company that improves email security. Partly, he says, that’s because blowing the whistle on Rothenberg dinged his career prospects. After once telling a job interviewer he was a whistleblower, he didn’t get a call back. Still, he says, the cost was worth it. “I knew that to some extent I would be damaging my career,” he says. “I was just so sure that it was the right thing to do.”
The bottom line: After struggling to find another job, Riordan is trying to form a company dedicated to creating email that’s more secure.