Martin Shkreli Arrested Over Securities Fraud

Martin Shkreli

Martin Shkreli, the 32-year old former hedge fund manager, and CEO of Turing Pharmaceuticals and KaloBios Pharmaceuticals was arrested by federal agents at his apartment in Manhattan.

Federal authorities filed charges against Shkreli for allegedly committing securities fraud for five years when he was working as CEO of Retrophin while also working as hedge fund manager of MSMB Capital and MSMB Healthcare. He pleaded not guilty on the charges against him, and posted a $5 million bail.

Shkreli gained a nefarious reputation after he decided to raise the price of Daraprim, a drug used by patients for parasitical infections, by more than 5,000%.  The medical community as well as government officials strongly criticized Shkreli as a “greedy” biotech executive.  He eventually decided to lower the price of Daraprim.

The arrest was not related to the drug prices, but on allegations that he misappropriated money from two hedge funds he founded and committed material misrepresentations to investors and other widespread misconduct

The Securities and Exchange Commission (SEC) filed civil charges against Shkreli. In a parallel action, the U.S. Attorney’s Office for the Eastern District of New York filed criminal charges against him including two counts of conspiracy to commit securities fraud, three counts of conspiracy to commit fraud and two counts of securities fraud.

Shkreli operated his companies like a Ponzi scheme

In a statement, Andrew H. Ceresney, director of Division of Enforcement at the SEC, commented, “Over a five-year period, Shkreli is alleged to have perpetrated a series of frauds on investors in his hedge funds and Retrophin’s shareholders in order to cover up his poor trading decisions.”

On the other hand, during a press conference, U.S. Attorney Robert Capers said Shkreli “essentially ran his companies like a Ponzi scheme, where he used each subsequent company to pay off defrauded investors in the prior company.”

Atty. Capers added that Shkreli used Retrophin as his “personal piggy bank” funneling millions of dollars in illegal repayments to investors he defrauded in his hedge funds.

“These charges in today’s indictment highlight the brazenness and breadth of Shkreli’s schemes and the outrageous web of lies and deceit weaved by both defendants,” said Atty. Capers.

Shkreli expects to be fully vindicated

Shkreli expects to be “fully vindicated” from all the charges filed against him, according to his spokesman Craig Stevens.

Stevens emphasized that the SEC and the prosecutors at the Eastern District of New York failed to understand that the MSMB-related transactions “involve complex accounting matters.

The spokesman added, “It is no coincidence that these charges, the result of investigations which have been languishing for considerable time, have been filed at the same time of Shkreli’s high-profile, controversial and yet unrelated activities.”

Furthermore, Stevens criticized the prosecutors for their portrayal of Shkreli    that he was involved in a Ponzi scheme. He said, Ponzi victims do not make money, yet Mr. Shkreli’s investors enjoyed strong results.”