WEBVTT - UPDATE: Life After Blowing the Whistle in Silicon Valley 0:00:00.200 --> 0:00:02.800 Hey, everyone, it's a key. As we get to the 0:00:02.880 --> 0:00:05.560 end of the year, we wanted to rebroadcast one of 0:00:05.559 --> 0:00:09.200 our favorite episodes, a story about a young man called 0:00:09.240 --> 0:00:14.480 Francisco Ordan. Francisco suspected his employer for breaking the law 0:00:14.880 --> 0:00:18.000 and went on to secretly report that company to the government. 0:00:18.880 --> 0:00:21.880 I recently sat down with Francisco to ask him about 0:00:21.920 --> 0:00:24.800 what his life has been like since we first aired 0:00:24.800 --> 0:00:28.880 that episode in May. For that conversation, stay tuned to 0:00:28.920 --> 0:00:36.239 the end. Just over a year ago, Francisco Reordan was 0:00:36.280 --> 0:00:39.480 a twenty seven year old software engineer, and he joined 0:00:39.479 --> 0:00:44.000 a venture capital firm called Rothenburg Ventures. The company's founder, 0:00:44.080 --> 0:00:49.000 Mike Rothenberg, was a young, charismatic Stanford University grad, and 0:00:49.040 --> 0:00:53.480 he was known around Silicon Valley for throwing these extravagant parties. 0:00:54.600 --> 0:00:58.080 Francisco had heard about his new employer's reputation, partly from 0:00:58.080 --> 0:01:00.520 a skeptical story I wrote for Business This Week back 0:01:00.520 --> 0:01:04.840 in At the time, Francisco didn't think much of it. 0:01:04.840 --> 0:01:06.840 It made me think it was a little bit risky, 0:01:06.880 --> 0:01:09.959 but um I still thought the company was making good 0:01:09.959 --> 0:01:14.280 investments based on their portfolio, so I said brush those 0:01:14.280 --> 0:01:18.280 concerns aside. And in retrospect, uh, I shouldn't have done that. 0:01:20.200 --> 0:01:24.800 I shouldn't have done that. Francisco says this because soon 0:01:24.840 --> 0:01:29.319 after he joined he started noticing some unusual things, things 0:01:29.520 --> 0:01:32.800 that were raising his suspicions. The more he dug around, 0:01:33.000 --> 0:01:35.360 the more he found. In just a few months in 0:01:35.480 --> 0:01:38.440 he discovered something he thought was bad, maybe even against 0:01:38.440 --> 0:01:41.160 the law, something that bothered him enough to take the 0:01:41.240 --> 0:01:48.160 very serious step of secretly reporting it to government regulators. Yeah. 0:01:48.200 --> 0:01:51.440 I mean, the internal debate was what will people think 0:01:51.440 --> 0:01:54.320 of me for doing this? I felt, I'm pretty sure 0:01:54.320 --> 0:01:55.680 it was the right thing to do, but you know, 0:01:55.720 --> 0:01:57.960 I thought about what are the consequences to me personally? 0:01:58.120 --> 0:02:03.200 By love the whistle. A week after Francisco filled out 0:02:03.240 --> 0:02:07.080 an online form on the website of the SEC short 0:02:07.160 --> 0:02:10.640 for the Securities and Exchange Commission, a lawyer from the 0:02:10.639 --> 0:02:14.799 commission got in touch with him. From there, Francisco became 0:02:14.919 --> 0:02:18.480 something of a double agent, providing the government information about 0:02:18.480 --> 0:02:22.600 his employer. Francisco's actions set in motion a series of 0:02:22.639 --> 0:02:25.919 events that ultimately brought down one of the venture capital 0:02:25.960 --> 0:02:30.640 industries aspiring stars. In addition to being investigated by the 0:02:30.800 --> 0:02:36.320 sec Rothenburg and his firm today is facing lawsuits from investors, creditors, 0:02:36.360 --> 0:02:51.760 and former employees. Hi, I'm aki Ito and I'm Adam Satriano. 0:02:52.160 --> 0:02:55.920 And this week on Decrypted, the whistleblower who secretly took 0:02:55.960 --> 0:03:00.360 on an ambitious venture capitalist is coming out, revealing his 0:03:00.440 --> 0:03:04.280 identity and publicly speaking out about his experiences for the 0:03:04.520 --> 0:03:08.400 very first time. Francisco said he decided to speak to 0:03:08.480 --> 0:03:11.720 us in part to encourage others to take action if 0:03:11.720 --> 0:03:15.760 they're seeing bad behavior at their companies. In Silicon Valley, 0:03:15.760 --> 0:03:19.400 where corporate governance sometimes takes a back seat to growing 0:03:19.440 --> 0:03:23.360 fast and making a name for yourself, employees are serving 0:03:23.480 --> 0:03:32.680 as one of the industry's toughest checks. So, Adam, you 0:03:32.720 --> 0:03:35.960 wrote a story about Mike Rothenberg and his VC firm. 0:03:36.160 --> 0:03:42.360 Back in the headline was telling Lee Silicon Valley's party animal. 0:03:42.680 --> 0:03:45.600 Yes he did not like that. Yeah, Bet, give us 0:03:45.600 --> 0:03:48.960 some background about the guy. What got me interested was 0:03:49.000 --> 0:03:51.960 you had this young venture capitalist. He had raised a 0:03:52.000 --> 0:03:54.040 decent amount of money, and I had also heard the 0:03:54.080 --> 0:03:58.080 story that he had first introduced Mark Zuckerberg to Instagram's founder, 0:03:58.160 --> 0:04:00.720 Kevin's instrom This was back when they or in their 0:04:00.720 --> 0:04:04.120 college days. But more than anything. I had heard about 0:04:04.160 --> 0:04:07.200 these events that he was throwing around San Francisco. Yeah, 0:04:07.240 --> 0:04:09.840 can you give us an example. Well, my favorite was 0:04:09.880 --> 0:04:12.200 these events that he had had that he called puppy Parties, 0:04:12.200 --> 0:04:15.240 and they would rent out puppies that people could pet. 0:04:15.640 --> 0:04:17.479 But there was this other one they did Quity called 0:04:17.520 --> 0:04:20.120 founders Field Day, and this was at a T and 0:04:20.200 --> 0:04:23.239 T park where the San Francisco Giants baseball team plays, 0:04:23.640 --> 0:04:26.560 and he rented the whole thing out, outfitted it with 0:04:26.880 --> 0:04:30.480 virtual reality boosts and other thing for entrepreneurs to come 0:04:30.520 --> 0:04:32.520 and play with. Yeah, this is the thing that the 0:04:32.880 --> 0:04:37.200 HBO show Silicon Valley ended up parodying, right. It was 0:04:37.279 --> 0:04:41.039 this perfect example of all the absurdity and exuberance of 0:04:41.120 --> 0:04:45.120 the startup lifestyle. Richard, after your perfect game at tech 0:04:45.160 --> 0:04:48.280 Crunch Disrupt a few weeks ago, we fell in love 0:04:48.320 --> 0:04:50.800 with you and your tech. Look. We know everyone in 0:04:50.839 --> 0:04:53.039 the valley is after you, and we know that you're 0:04:53.040 --> 0:04:56.760 probably going to go with Peter Gregory, but we'd love 0:04:56.800 --> 0:04:59.480 to have you come play on our team. Let's stern 0:04:59.600 --> 0:05:04.280 Teller Capital funding on your Series A financing, because together, Richard, 0:05:04.720 --> 0:05:15.200 we'd be oh home run and Rothenberg really seemed like 0:05:15.200 --> 0:05:17.840 a character from the show. When I interviewed him for 0:05:17.880 --> 0:05:20.919 that story in I sometimes wondered if he was putting 0:05:20.960 --> 0:05:23.880 me on. He has a real gift for hyperbole, even 0:05:23.920 --> 0:05:26.880 by the lofty standards of Silicon Valley. Here's a clip 0:05:26.880 --> 0:05:29.000 from a talkie gave its Stanford a few years ago, 0:05:29.400 --> 0:05:31.080 and we want to talk a little bit aboutlue oceans. 0:05:31.120 --> 0:05:32.800 So when you're in a blue ocean, it means that 0:05:32.839 --> 0:05:34.880 it's kind of a new market. It hasn't fully developed, 0:05:35.040 --> 0:05:37.960 and people are I'm not yet sure where it's gonna go, 0:05:38.279 --> 0:05:41.039 but everybody wins because it's a blue ocean and everybody's 0:05:41.040 --> 0:05:45.440 gathering the opportunities. And now back to red oceans. Rewind 0:05:45.800 --> 0:05:48.600 what did you just say. In a blue ocean, everybody 0:05:48.600 --> 0:05:51.720 can win. And the story we did wasn't a flattering profile. 0:05:52.120 --> 0:05:55.040 That some former employees told me that Rothenberg made them 0:05:55.040 --> 0:05:57.600 buy up all the week's issues of Business Week at 0:05:57.600 --> 0:06:00.599 the airport so they wouldn't see him. But the firm 0:06:00.680 --> 0:06:04.320 was doing just fine even after your story. Right. Yeah, 0:06:04.320 --> 0:06:06.440 they aren't a big firm by any stretch, but they 0:06:06.480 --> 0:06:09.239 were backing a lot of companies like the stock trading 0:06:09.279 --> 0:06:11.880 app robin Hood, which is now valued at more than 0:06:11.920 --> 0:06:15.040 a billion dollars, and it was with that backdrop that 0:06:15.080 --> 0:06:18.839 Francisco joined Rothenburg Ventures to run their website and office 0:06:18.880 --> 0:06:25.960 I T system. We recently visited Francisco at his one 0:06:26.000 --> 0:06:30.039 bedroom apartment in one of San Francisco's residential neighborhoods. It's 0:06:30.040 --> 0:06:33.000 in an old building built after the nineteen o six earthquake. 0:06:33.360 --> 0:06:35.240 It's at the top of one of the city's many 0:06:35.360 --> 0:06:48.640 large hills. Thanks, thanks, I thought, okay. He gave us 0:06:48.640 --> 0:06:52.720 a quick tour. It's essentially a nerdy bachelor pad. There 0:06:52.800 --> 0:06:55.640 was a big whiteboard on one side of the living room, 0:06:55.800 --> 0:06:58.560 which I've seen in the bedrooms of some of my 0:06:58.640 --> 0:07:01.800 other friends who are engineered is too. It's so that 0:07:01.839 --> 0:07:04.960 they can write out their code by hand. Francisco so 0:07:05.080 --> 0:07:08.560 had these three big computer monitors on his desk, plus 0:07:08.600 --> 0:07:12.000 a few consoles to play his video games. And he 0:07:12.080 --> 0:07:16.560 had these framed pictures of Apple's famous ad campaign dubbed 0:07:16.600 --> 0:07:20.560 Think Different, featuring people like Picasso. His bedroom and his 0:07:20.680 --> 0:07:23.600 kitchen were a little bit messy. Can I see what's 0:07:23.600 --> 0:07:33.360 in your fridge? Oh, you're soilent drinker. For our listeners, 0:07:33.400 --> 0:07:37.960 Soilent is a drink made out of these different nutritional powders, 0:07:38.320 --> 0:07:40.960 and it's really popular with coders who don't want to 0:07:40.960 --> 0:07:45.320 spend time eating real food. Anyway, that's all to say 0:07:45.360 --> 0:07:47.960 that Francisco is a lot like other young engineers in 0:07:48.000 --> 0:07:51.240 Silicon Valley. He went to Stanford and the first job 0:07:51.240 --> 0:07:53.559 he took straight out of school ended up getting bought 0:07:53.600 --> 0:07:56.560 by the tech giant Cisco, not to be confused with 0:07:56.640 --> 0:07:59.800 the nickname that Francisco goes by. And then with that 0:08:00.000 --> 0:08:02.840 small amount of money he ended up making from that acquisition, 0:08:03.080 --> 0:08:05.440 he started his own company that was in exchange for 0:08:05.520 --> 0:08:08.880 betting on the price of bitcoin. This kind of options 0:08:08.920 --> 0:08:11.480 market for bitcoin turned out not to be compliant with 0:08:11.560 --> 0:08:14.640 federal regulations, so the government sent him a letter to 0:08:14.640 --> 0:08:19.480 shut it down, and he did not long after. In February, 0:08:20.360 --> 0:08:24.680 Rothenberg Ventures hired Francisco. Rothenberg offered him a salary of 0:08:24.680 --> 0:08:27.360 a hundred and thirty thousand dollars plus a thirty thousand 0:08:27.440 --> 0:08:30.440 dollar bonus. And although he said the firm had scaled 0:08:30.480 --> 0:08:33.360 back on some of those glitzier events, it still had 0:08:33.360 --> 0:08:35.839 a luxury suite at the basketball arena where the Golden 0:08:35.840 --> 0:08:38.840 State Warriors played. He went to the games and even 0:08:38.840 --> 0:08:41.960 saw a Rihanna concert there once, all in the company's dime. 0:08:42.440 --> 0:08:45.440 It was a sweet job for a young guy like Francisco, 0:08:45.840 --> 0:08:48.800 but it didn't take him long to start to notice 0:08:48.840 --> 0:08:52.200 some things. Well. The first red flag was actually my 0:08:52.240 --> 0:08:56.440 first week on. The director of finance, who was also 0:08:56.480 --> 0:08:59.880 the head of clients quit. She just ran out. I 0:09:00.000 --> 0:09:01.880 didn't know why. Nobody explained it to me, but that 0:09:01.960 --> 0:09:04.480 was the first red flag. Was it clear that something 0:09:04.640 --> 0:09:06.840 was weird was going on? It was clear that something 0:09:06.840 --> 0:09:09.120 weird was going on, but I didn't know what it was. 0:09:09.160 --> 0:09:11.920 I thought it might have been something personal or um. 0:09:11.960 --> 0:09:13.520 One of the things I suspected was that it was 0:09:13.559 --> 0:09:18.760 just like too broy an environment. For Not long after, 0:09:18.920 --> 0:09:23.120 Francisco said, there was another troubling incident. Uh, there's a 0:09:23.120 --> 0:09:27.000 growing incident. Somebody on the investment team grow up to 0:09:27.160 --> 0:09:30.679 an executive assistant. Um, I might get it up, putting 0:09:30.720 --> 0:09:33.559 him on unpaid leave for a while, and then um, 0:09:33.559 --> 0:09:36.560 he came back shortly before everyone was put on you know, 0:09:37.720 --> 0:09:41.280 let's out basically where it was it? Where did this happen? 0:09:41.360 --> 0:09:43.800 Just at the office at a party? It was a yeah, party. 0:09:44.160 --> 0:09:47.040 It was actually Mike's birthday. Everyone went out to a 0:09:47.080 --> 0:09:52.160 bar tonic un poll and lots of shots. UM. The 0:09:52.200 --> 0:09:55.480 growing thing happened kind of ruin the night. So that 0:09:55.640 --> 0:09:58.240 so there's some really red flags. But so you hit 0:09:58.320 --> 0:10:03.040 your it got your suspicion zone. But then you're still 0:10:04.480 --> 0:10:06.680 learning things. What else were you learning? Yeah, so I 0:10:06.679 --> 0:10:11.199 had my initial suspicions. UM, A whole theme throughout everything 0:10:11.280 --> 0:10:17.440 was just ridiculous spending UM any online sports suites UM. 0:10:17.520 --> 0:10:21.520 And then I had some additional suspicions UM the whole time. 0:10:21.760 --> 0:10:25.680 River STUDIOSUM was in the same building. But Mike never 0:10:26.280 --> 0:10:32.440 really explained the funding situation. Let me explain a little bit. 0:10:32.840 --> 0:10:36.880 In addition to Rothenberg Ventures the VC firm, Mike has 0:10:37.000 --> 0:10:40.320 also set up another business, a production company called River 0:10:40.480 --> 0:10:44.280 Studios that made virtual reality videos, and he set up 0:10:44.280 --> 0:10:48.120 another business on top of that called River Enterprises, which 0:10:48.160 --> 0:10:51.600 was another way of investing in companies. Francisco says Mike 0:10:51.720 --> 0:10:55.720 own a major interest in these new businesses. They were 0:10:55.760 --> 0:10:58.720 supposed to be separate from the venture capital firm that 0:10:58.760 --> 0:11:03.000 Francisco worked for, which was managing other people's money, but 0:11:03.440 --> 0:11:06.120 Francisco was being regularly asked to do work for the 0:11:06.160 --> 0:11:09.360 other businesses, and that made him uncomfortable because he was 0:11:09.360 --> 0:11:14.360 supposed to work for just the VC fund. I felt 0:11:14.400 --> 0:11:17.320 like I'd been do by Mike. I felt like, you know, 0:11:17.360 --> 0:11:19.240 I came in to build the sell people at all, 0:11:19.320 --> 0:11:21.400 to make things easier for the LPs. It turned out 0:11:21.440 --> 0:11:23.840 he was actually using it, as you know, a way 0:11:23.880 --> 0:11:26.880 to mislead the LPs. Like one of the one of 0:11:26.920 --> 0:11:29.679 the things that it was used for, it was sending 0:11:29.720 --> 0:11:33.520 out nass emails with notifications about the annual reports. And 0:11:33.760 --> 0:11:36.000 these feral reports didn't tell the whole story. He left 0:11:36.040 --> 0:11:41.240 out big things. Francisco had access to the company's I 0:11:41.400 --> 0:11:45.160 T system, so he started doing some sleuthing. In a minute, 0:11:45.240 --> 0:11:52.520 we'll find out what he discovered. Before the break, Francisco 0:11:52.640 --> 0:11:55.920 had started noticing some things that made him suspicious of 0:11:55.960 --> 0:11:59.040 the venture capital firm he just joined, and he started 0:11:59.040 --> 0:12:02.680 poking around on top of the lavish spending. Francisco would 0:12:02.720 --> 0:12:06.320 later discover internal documents that showed that the management fees 0:12:06.400 --> 0:12:09.760 the VC firm had collected from its investors. So this 0:12:09.840 --> 0:12:13.120 is the money specifically intended for operating the fund was 0:12:13.200 --> 0:12:17.800 actually being used by the Virtual reality companies that Rothenburg 0:12:17.880 --> 0:12:22.840 was funding. Instead, I kept escalating and escalating UM. Also, 0:12:23.160 --> 0:12:26.960 because I made the LP portal, I I was asked 0:12:27.000 --> 0:12:30.000 to upload annual reports, so I look at those, and 0:12:30.040 --> 0:12:33.240 I'd see that these companies weren't disclosed them like there's 0:12:33.400 --> 0:12:35.560 zero mentioned or River Enterprises in any of the annual 0:12:35.600 --> 0:12:38.839 reports UM zero. I mentioned a River Studios and annual 0:12:38.920 --> 0:12:45.280 reports UM Also, so that you were concerned that investors 0:12:45.360 --> 0:12:48.679 didn't even know that they were in sort of indirectly 0:12:48.720 --> 0:12:56.280 at least funding some of these other activities exactly. Most 0:12:56.280 --> 0:12:59.080 people shrugged off what they were seeing at Rothenberg Ventures. 0:12:59.360 --> 0:13:01.840 I spoke with Warmer employees who said that even though 0:13:01.880 --> 0:13:05.160 that they had felt uncomfortable, nobody thought to step forward. 0:13:05.600 --> 0:13:09.720 And it might sound like Francisco's nitpicking these tiny technical 0:13:09.800 --> 0:13:14.280 details here, but I ran it by Andrew Touch, a 0:13:14.320 --> 0:13:18.520 professor specializing in financial regulation at Washington University School Law, 0:13:19.040 --> 0:13:21.360 and he said, this sounds like a case of self dealing, 0:13:21.679 --> 0:13:23.839 which is when a person who's supposed to be looking 0:13:23.840 --> 0:13:27.120 out for the interests of investors instead takes advantage of 0:13:27.120 --> 0:13:31.200 his position to benefit him or herself. Apparently, the courts 0:13:31.200 --> 0:13:34.640 are pretty strict about this, Andrew said, this fiduciary duty 0:13:34.760 --> 0:13:38.000 is the bedrack of finance of maintaining the trust between 0:13:38.040 --> 0:13:42.280 companies and their investors. At the time that Francisco didn't 0:13:42.320 --> 0:13:45.640 get the benefit of that expert guidance, but he still 0:13:45.679 --> 0:13:48.480 felt strongly that it was worth talking to the SEC. 0:13:49.320 --> 0:13:51.760 He'd read up on the responsibility that a fund like 0:13:51.880 --> 0:13:56.079 Rothenberg Ventures has two investors who have given it money. 0:13:56.480 --> 0:13:59.600 He felt it could be fraud if Rothenberg wasn't using 0:13:59.600 --> 0:14:02.200 the money in a way that he had told investors 0:14:02.240 --> 0:14:05.079 it would be used. Once he made up his mind, 0:14:05.240 --> 0:14:09.839 Francisco went to the agency's website SEC dot go slash whistleblower, 0:14:10.200 --> 0:14:13.160 where there's a form to submit tips. It's a simple 0:14:13.240 --> 0:14:16.160 questionnaire where you describe the complaint and give the government 0:14:16.240 --> 0:14:20.080 some information about yourself, and there's a way to upload documents. 0:14:20.320 --> 0:14:23.520 In the complaint, he listed examples of how he felt 0:14:23.560 --> 0:14:27.120 funds were being misused. So I submitted the forum. About 0:14:27.120 --> 0:14:29.480 a week later, I got an email from the staff 0:14:29.480 --> 0:14:31.800 attorney there. She asked me to go in. I went 0:14:31.800 --> 0:14:34.880 in for one meeting at their San Francisco office, um 0:14:34.960 --> 0:14:37.280 we talked about the forum. She had a print out 0:14:37.440 --> 0:14:40.160 of the website which had everybody's picture on it, So 0:14:40.200 --> 0:14:42.680 we spent some time talking about each employee, what their 0:14:42.800 --> 0:14:45.520 role was. It was, you know, like a nice office 0:14:45.520 --> 0:14:48.840 building on Montgomery Street. It was just the two of 0:14:48.880 --> 0:14:51.360 us in that conference room for that meeting, and then 0:14:51.640 --> 0:14:55.880 later on in subsequent meetings or more people. Francisco had 0:14:55.880 --> 0:14:58.080 a lot writing on this. He knew that coming forward 0:14:58.080 --> 0:15:00.840 could cost him his job. If the sc C decided 0:15:00.880 --> 0:15:03.720 to do nothing against Rothenburg would still be worth it. 0:15:04.040 --> 0:15:07.080 Did you think that they could? You would be damaging 0:15:07.160 --> 0:15:09.520 your career in your future. Yeah, I knew that to 0:15:09.520 --> 0:15:13.360 some extent. I would be damaging my career. Why do 0:15:13.440 --> 0:15:17.840 you say that. I'm just so sure that it was 0:15:17.880 --> 0:15:21.200 the right thing to do that, you know, Uh, it 0:15:21.320 --> 0:15:26.080 was worth that price that I'd have to pay. After 0:15:26.120 --> 0:15:29.120 that first meeting with the SEC, Francisco went back to 0:15:29.200 --> 0:15:32.800 work like nothing was different. He began to live this 0:15:32.960 --> 0:15:36.320 somewhat double life. While working like normal, He was also 0:15:36.400 --> 0:15:42.040 corresponding with SEC, sharing documents with them. Another information about Rothenberg. 0:15:42.280 --> 0:15:46.400 Getting access to these documents wasn't difficult. Francisco was in 0:15:46.480 --> 0:15:49.400 charge of I T at Rothenberg Ventures, so he had 0:15:49.440 --> 0:15:52.200 access to all kinds of things that others didn't like, 0:15:52.280 --> 0:15:56.960 financial reports, email logs, and investor information. He'd copy them 0:15:56.960 --> 0:15:58.800 onto a thumb drive and then send them to the 0:15:58.920 --> 0:16:02.560 SEC via E Neil later from his house. Did you 0:16:02.600 --> 0:16:08.040 feel paranoying a little bit? Yeah, but I just didn't 0:16:08.080 --> 0:16:13.360 mention it to anybody, and um, I didn't feel that different. 0:16:14.640 --> 0:16:17.840 This double life didn't go on for long. A big 0:16:17.840 --> 0:16:20.360 turning point came just a few days later when he 0:16:20.440 --> 0:16:23.840 told the SEC that Rothenburg Ventures was making some changes 0:16:23.880 --> 0:16:26.280 to its I T systems and some of the email 0:16:26.320 --> 0:16:29.920 accounts were being deleted. This was in July of last year, 0:16:31.080 --> 0:16:34.960 soon after the SEC sent an order to Rothenberg Ventures 0:16:35.160 --> 0:16:38.680 telling them to not delete any records. It was the 0:16:38.720 --> 0:16:40.880 first time that the firm knew it was in the 0:16:41.000 --> 0:16:45.520 SEC's cross hairs. And then Francisco got a message to 0:16:45.560 --> 0:16:48.640 come to a meeting with two senior executives at the firm. 0:16:48.720 --> 0:16:51.720 Mike Rothenberg wasn't there. I was doing my work and 0:16:51.720 --> 0:16:53.960 then one of them sent me a text message and 0:16:53.960 --> 0:16:55.640 he said that he had an I T problem that 0:16:55.680 --> 0:16:57.600 he needed help with, so could I make sure I 0:16:57.680 --> 0:17:01.400 was in the office and minutes and I said yeah, sure, 0:17:02.160 --> 0:17:04.440 And then I think about half an hour went by, 0:17:04.720 --> 0:17:06.680 and then he came by and got me. I was 0:17:06.720 --> 0:17:08.880 sitting sitting out of couch in the main office there, 0:17:09.119 --> 0:17:13.160 and then he took me um into what was really 0:17:13.240 --> 0:17:15.480 Mike's office, but Mike wasn't in the office that day, 0:17:15.720 --> 0:17:19.120 just a small office by itself. Off that man rum 0:17:20.280 --> 0:17:25.840 and what happened? So his first question, UM was he said, UM, 0:17:25.880 --> 0:17:28.720 so we've noticed that you've been doing some government related searches. 0:17:29.560 --> 0:17:31.280 And I didn't say anything to that. And then he 0:17:31.320 --> 0:17:34.840 said did anybody tell you to do that? And I said, 0:17:35.040 --> 0:17:37.840 I'm not going to answer that question. And then he said, 0:17:38.119 --> 0:17:43.600 well you're terminated effective immediately, um, and then long awkward pause, 0:17:44.119 --> 0:17:46.440 and then he said do you have anything to say? 0:17:46.880 --> 0:17:48.840 And I said, um, I have some personal litems to 0:17:48.880 --> 0:17:52.199 my desk actually grab and then he had started me 0:17:52.320 --> 0:17:54.600 to get that stuff and then out of the building. 0:17:55.400 --> 0:17:57.400 How did you feel after that? Where you said, did 0:17:57.440 --> 0:18:00.240 you cry? Were you angry? Whom he wouldn't I was. 0:18:00.280 --> 0:18:03.600 I was angry, like my my heart was founding. Um, 0:18:03.240 --> 0:18:07.000 it's mainly angry. Why were you angry? That was unfair? 0:18:07.080 --> 0:18:10.400 Like you can't terminate it's a blur like that. Um, 0:18:10.440 --> 0:18:12.680 and this was immediately after they got a document particivation 0:18:12.800 --> 0:18:17.800 order from the SEC. That's probably what that's probably that's 0:18:17.840 --> 0:18:22.280 why they're suspicious. Yeah. The SEC has declined to comment 0:18:22.320 --> 0:18:25.399 about the case, but tech Crunch reported Rothenberg Ventures as 0:18:25.440 --> 0:18:29.000 being investigated for wire fraud, bank fraud, and breach of 0:18:29.040 --> 0:18:35.920 fiduciary duty in law suits from investors and employees. It's 0:18:35.960 --> 0:18:40.359 been alleged that Mike Rothenberg used money intended for the 0:18:40.400 --> 0:18:44.680 startups for his own benefit to support his own lifestyle, 0:18:45.560 --> 0:18:48.600 and Francisco learned from emails he had downloaded from the 0:18:48.600 --> 0:18:52.600 firm that at one point Mike Rothenberg was paying himself 0:18:52.640 --> 0:18:56.200 about one million dollars, which is a huge amount for 0:18:56.280 --> 0:18:59.760 a relatively small firm. But Rothenberg was also struggling to 0:18:59.800 --> 0:19:03.280 man it's it all last year, Rothenberg needed to provide 0:19:03.320 --> 0:19:07.520 documents and tax information and some return on investment to investors, 0:19:08.480 --> 0:19:12.000 and according to Francisco and some media reports, the money 0:19:12.119 --> 0:19:15.120 wasn't there. Okay, so this is a little bit complicated, 0:19:15.119 --> 0:19:19.080 but stick with us. The records show that River Studios, 0:19:19.160 --> 0:19:22.120 which if you remember, is one of the virtual reality 0:19:22.160 --> 0:19:27.240 businesses founded by Mike Rothenberg. This started perceived two million 0:19:27.359 --> 0:19:32.199 dollars from an investor. The same day, River Studios transferred 0:19:32.240 --> 0:19:36.760 one point seven million dollars to Mike Rothenberg's personal account. 0:19:37.680 --> 0:19:41.639 Also on that same day, Mike Rothenberg transferred once again 0:19:41.880 --> 0:19:45.800 one point seven million dollars from his own account to 0:19:45.920 --> 0:19:51.679 the Rothenberg Ventures account. According to Francisco, that gave Rothenberg 0:19:51.800 --> 0:19:55.440 Ventures the money to meet the deadline of the other investors. 0:19:55.880 --> 0:19:58.439 By the way, that investor who wired the two million 0:19:58.560 --> 0:20:02.240 has now sued Rothenberg. The lawsuit alleges that Rothenburg co 0:20:02.359 --> 0:20:06.119 mingled the bank accounts of his various entities, essentially treating 0:20:06.160 --> 0:20:18.159 the accounts of those businesses as as personal accounts. By 0:20:18.200 --> 0:20:21.399 the second half of last year, employees quit in mass 0:20:21.640 --> 0:20:24.360 and a class action lawsuit is working its way through 0:20:24.400 --> 0:20:28.240 the courts. It alleges that staffers weren't paid. Another former 0:20:28.280 --> 0:20:31.200 employee has sued for more than a hundred thousand dollars 0:20:31.680 --> 0:20:35.080 that alleges Rothenberg didn't repay for business charges that have 0:20:35.200 --> 0:20:38.600 been put on a credit card. American Express is also 0:20:38.720 --> 0:20:43.520 sued for unpaid charges. I knew Mike Rothenberg a touch 0:20:43.560 --> 0:20:46.320 when I did that story back in so I reached 0:20:46.320 --> 0:20:49.280 out to him about Francisco and to get his side 0:20:49.280 --> 0:20:52.080 of the story. He didn't respond, but a person who 0:20:52.080 --> 0:20:55.040 works for a New York PR firm that specializes in 0:20:55.160 --> 0:20:59.800 crisis management and image rehabilitation reached out. He told me 0:20:59.840 --> 0:21:02.720 my wouldn't be available for an interview given the ongoing 0:21:02.800 --> 0:21:07.800 investigations in lawsuits Adam. Did the spokesman comment at all 0:21:07.840 --> 0:21:11.119 about Francisco or the allegations made by him and in 0:21:11.160 --> 0:21:15.439 the lawsuits. He disputed Francisco's allegation that he was fired 0:21:15.480 --> 0:21:19.159 for speaking with SEC. He said that Francisco had already 0:21:19.160 --> 0:21:22.480 given notice that he was leaving. Francisco says this is 0:21:22.560 --> 0:21:26.640 not true. The spokesman also pointed out that Francisco had 0:21:26.680 --> 0:21:30.040 this run in with authorities for the bitcoin exchange. He 0:21:30.080 --> 0:21:33.679 was implying that undermines his credibility. But what about the 0:21:33.840 --> 0:21:38.480 core allegations about misusing money. The spokesman declined to comment 0:21:38.520 --> 0:21:42.240 about the specifics, but Rothenberg did post a Facebook live 0:21:42.320 --> 0:21:46.560 video earlier this year to explain. So one of the 0:21:46.560 --> 0:21:49.199 things that I just wanna answer head on which I 0:21:49.280 --> 0:21:51.199 which I have done to the press, but they have 0:21:51.320 --> 0:21:53.360 not published it, and I want to be sure I'm 0:21:53.440 --> 0:21:56.600 very clear about this. Is the question I've had is 0:21:56.960 --> 0:21:59.879 you know, have you taken any money and properly and 0:22:00.280 --> 0:22:02.639 answers know? And I've said that before and and uh, 0:22:02.960 --> 0:22:05.359 it continues to that message continues to knock it out 0:22:05.400 --> 0:22:07.399 there as clearly as it should. And another one is 0:22:07.440 --> 0:22:10.520 that have we made any investments without investor permission? We haven't. 0:22:10.760 --> 0:22:14.320 We have not made any investments without investor permission. For 0:22:14.359 --> 0:22:17.240 those kinds of rumors going quickly, there has to be 0:22:17.320 --> 0:22:20.680 very responsible reporting, and um, there has to be fair 0:22:20.720 --> 0:22:24.320 and balance reporting, and there's a very big um, there's 0:22:24.320 --> 0:22:27.480 a very big weight on the shoulders of reporters because 0:22:28.000 --> 0:22:31.239 those um that particular group of people. The video goes on, 0:22:31.359 --> 0:22:33.719 and in it, he spends a lot of time blaming 0:22:33.720 --> 0:22:37.240 the media for bias coverage. Adam, you spoke to a 0:22:37.359 --> 0:22:40.719 few professors to better understand what kind of trouble that 0:22:40.800 --> 0:22:44.280 Mike Rothenberg and his firm might be in what I 0:22:44.359 --> 0:22:47.720 learned is the SEC has been pretty vigilant in protecting whistleblowers, 0:22:47.760 --> 0:22:51.120 including bringing actions against those who retaliate. So that means 0:22:51.160 --> 0:22:54.680 it will be pretty difficult for Rothenberg to come after 0:22:54.760 --> 0:22:58.320 Francisco for going to the SEC. Yeah, and I also 0:22:58.400 --> 0:23:01.320 learned that Rothenberg could be in hot water, especially for 0:23:01.359 --> 0:23:04.840 what appears to be mismanagement of funds. Like we talked 0:23:04.840 --> 0:23:08.240 about earlier, fidiciary duty is the bedrock of finance. It's 0:23:08.280 --> 0:23:11.679 that trust between an investor and a person like Rothenberg 0:23:11.720 --> 0:23:14.480 who's investing that money on their behalf. Do you think 0:23:14.480 --> 0:23:17.560 there's a risk of jail time here? People I spoke 0:23:17.600 --> 0:23:20.879 with didn't think so, but there's definitely a possibility of 0:23:20.920 --> 0:23:26.879 financial penalties. And even beyond that, Mike Rothenberg's reputations and tatters. 0:23:26.920 --> 0:23:31.879 Now that's right, and Rothenberg was this really ambitious venture capitalist, 0:23:32.000 --> 0:23:35.440 but now that the firm is a bare bone staff 0:23:35.480 --> 0:23:40.639 and the reputation has really been hurt. In addition to 0:23:40.680 --> 0:23:45.280 speaking with the SEC, Francisco also began communicating with a 0:23:45.280 --> 0:23:49.320 few journalists about what he'd been finding at Rothenberg, under 0:23:49.359 --> 0:23:52.800 the condition that they wouldn't name him. At that point, 0:23:52.800 --> 0:23:55.760 while the firm's big spending and lavish events were well known, 0:23:56.080 --> 0:23:59.600 the internal turmoil had been largely kept under wraps. But 0:23:59.640 --> 0:24:02.560 in the months after that, several very tough stories came 0:24:02.600 --> 0:24:07.840 out chronicling Rothenberg's questionable management of funds. Francisco says that 0:24:07.880 --> 0:24:11.240 he never regretted the decisions he made, but it did 0:24:11.240 --> 0:24:14.439 take a toll. After he says he was fired, he 0:24:14.520 --> 0:24:17.080 made a last minute decision to join some friends going 0:24:17.080 --> 0:24:20.119 on a seven day hike in Sweden. On the walks, 0:24:20.119 --> 0:24:23.200 he talked about the ordeal with Justin Chen, a friend 0:24:23.280 --> 0:24:26.760 who's also a software engineer. It's sort of that I 0:24:26.840 --> 0:24:30.480 realized that, oh, he wants to leave this city because 0:24:30.480 --> 0:24:34.439