Mike Rothenberg has been in a heap of trouble over a series of purportedly fraudulent transactions within his investment firm Rothenberg Ventures and his virtual reality startup River Studios. Now Transcend VR, as first reported in The Wall Street Journal, is suing the venture capitalist on allegations of fraud, breach of contract and deceptive diversion of funds.

Transcend, which filed the lawsuit in the California state superior court last week, says it invested $2 million as a convertible promissory note in Bend Reality LLC (i.e. River Studios) on the belief it was the first non-founder to invest and that Rothenberg held 100 percent equity in River.

However, Transcend says Rothenberg diverted $5 million over a two-year period from “another investment” into River Studios starting in 2014, giving those investors a beneficial ownership in the virtual reality startup. Transcend maintains it was never told of this previous investment.

We’ve reached out to Mike Rothenberg to hear from him on this recent accusation but have yet to hear back, though he has maintained his innocence on similar matters. We’ve also reached out to Transcend’s lawyers for comment.

According to the suit, River also agreed it would pay back the principle of the loan with 5 percent interest on the third anniversary of the loan on the condition that if River committed any act of bankruptcy the startup would immediately repay the loan, along with the unpaid interest.

However, Transcend says Rothenberg described in emails to investors a recent loss of employees and working capital had put River Studios in “jeopardy,” writing that he now “valued River Studios ‘at cost’ and that equity investments could very well ‘disappear.'”

Rothenberg has been accused on numerous occasions of disregard for maintaining separation of funds. Transcend furthers those claims, alleging River Studios as the “alter ego of Rothenberg,” accusing him of commingling accounts and using them as “his personal bank account.”

The suit further claims Rothenberg diverted loan proceeds without investor knowledge into his personal account. An earlier TechCrunch report touching on the Transcend investment shows documentation in which Rothenberg wired $1.7 million directly to his personal bank account on the same day Transcend wired the $2 million to Bend Reality LLC.

Meanwhile, Rothenberg faces two other lawsuits from former employees and may still be under an SEC investigation for allegations of bank fraud, wire fraud and breach of fiduciary duty.

For more information you can read details of the lawsuit in full below:

Transcend Vr Lawsuit by TechCrunch on Scribd