The CEO of a pharmaceuticals company who became one of the most hated men on the Internet after it was revealed his company jacked up the price of a live-saving drug has been arrested on federal fraud charges.
Martin Shkreli, the 32-year-old Turing Pharmaceuticals boss, was arrested Thursday morning by the on security fraud charges.
The charges are not related to the price gouging scandal. They are instead connected to his time at Retrophin Inc., a biotechnology firm he previously founded.
“As alleged, Martin Shkreli engaged in multiple schemes to ensnare investors through a web of lies and deceit,” said Robert Capers, U.S. Attorney for the Eastern District of New York, said in a statement. “His plots were matched only by efforts to conceal the fraud, which led him to operate his companies, including a publicly traded company, as a Ponzi scheme, where he used the assets of the new entity to pay off debts from the old entity.”
FBI Assistant Director-in-Charge Diego Rodriguez said the charges, “describe a securities fraud trifecta of lies, deceit, and greed. As charged, Martin Shkreli targeted investors and retained their business by making several misrepresentations and omissions about key facts of the funds he managed. He continued to lie about the success of the investments and used assets from Retrophin to payoff MSMB investors.”
Shkreli’s current company, Turing, purchased the rights to the drug Daraprim, which is used to treat a rare parasitic infection that targets pregnant women and AIDS and cancer patients. The 60-year-old drug’s price was hiked from $13.50 a tablet to $750.
Shkreli was released after posting $5 million bail following his first court appearance Thursday.
Here’s what you need to know:
1. He Is Accused of Using Millions in Retrophin Funds to Illegally Pay Off His Failed Hedge Fund’s Debt
Shkreli is accused of misappropriating funds from Retrophin Inc. to pay off the debts of his failed hedge fund, MSMB Capital Management, according to Reuters.
He closed MSMB in 2012 and was CEO of Retrophin from then until 2014, when the company’s board removed him from his position. Reuters reports that he used $11 million dollars from Retrophin to fund settlement agreements and sham consulting deals to pay off the MSMB debt.
The 29-page indictment charges Shkreli with seven counts, including conspiracy to commit securities fraud, conspiracy to commit wire fraud and securities fraud. You can read the indictment below:
He faces up to 20 years in prison if convicted.
Shkreli is also being sued by Retrophin for $65 million, Forbes reports. He has called the accusations were “preposterous.”
Read Retrophin’s lawsuit below:
He was arrested by FBI agents on Thursday. According to Reuters, he was led from the Murray Hill Tower Apartments in Manhattan and escorted to a car.
Retrophin said in a statement to Bloomberg that it has “fully cooperated with the government investigations into Mr. Shkreli.” The company said he was removed as CEO “because of serious concerns about his conduct.”
Shkreli, his company and his attorneys have not yet commented on the arrest.
Evan Greebel, a New York lawyer, was also arrested Thursday and is accused of conspiring with Shkreli in the scheme.
“When regulators and auditors questioned Shkreli’s decisions, he joined forces with Evan Greebel, who used his law license and training to conceal and further the scheme,” U.S. Attorney Robert Capers said. “The charges and arrests announced today reflect our commitment to hold accountable corporate executives and licensed professionals who betray their positions of trust in order to fraudulently enrich themselves.”
FBI Assistant Director-in-Charge Diego Rodriguez added, “In the end, Shkreli and Greebel used a series of settlement and sham consulting agreements that resulted in Retrophin and its investors suffering a loss in excess of $11 million. While the charges announced today are significant, they are but one example of what’s left to come as the FBI continues this investigation.”
2. His Arrest Caused Stock in Another of His Companies to Crash – Costing Him Millions
Shkreli also runs KaloBios Pharmaceuticals Inc. after buying a majority stake in the company last month.
According to Reuters, stock in KaloBios fell 53 percent following word of his arrest, from $11.03, in the premarket before trading was halted.
The drop has cost him more than $25 million.
“With the stock last changing hands at $11.03 in premarket trade prior to the halt, down $12.87, or 53%, from Wednesday’s closing price of $23.59, Shkreli’s stake was worth $26.7 million less than yesterday,” MarketWatch reports.
Turing Pharmaceuticals, the company that owns Daraprim, is a privately held firm.
3. Outrage Against Shkreli Grew As He Defended the Decision to Hike the Drug Price
Shkreli did himself no favors as he defended his decision to hike the drug price in TV interviews and on social media.
On his Twitter page, Shkreli has been dealing with the fallout of his price increase by posting the lyrics and a video-link to Eminem’s “The Way I Am.” A song in which the Detroit rapper lashed out at those who he felt were putting to much pressure on him. He also then retweeted a message from his Turig Pharmaceuticals co-founder Edwin Urrutia who wrote “an inordinate amount of pharmaceutical experts on Twitter today.”
He told the New York Times that Daraprim is “one of the smallest pharmaceutical products in the world.” Adding “It really doesn’t make any sense to get any criticism for this.” His general point was that the drug’s pricing would have little effect but it doesn’t get used that much anymore.
4. Hillary Clinton Targeted Shkreli, Saying She Would ‘Hold Him Accountable’ for the Price Gouging
Democratic presidential candidate Hillary Clinton attacked Shkreli over his price gouging in a campaign ad and in Facebook posts.
“Do the right thing. Lower the cost today to its original price. There are other drug companies gouging Americans with higher prices than they charge other people around the world,” Clinton wrote on Facebook. In another post she said, “if you’re price gouging American families and jacking up costs for no good reason, I’m going to hold you accountable.”
Clinton again swiped at Shkreli in November, but he brushed it off with a simple reply on Twitter.
Shkreli donated $2,700 to the campaign of Clinton’s opponent, Bernie Sanders, and said he wanted a meeting with him. Sanders rejected him, donating the money to a charity, according to the Boston Globe.
He was also criticized by Republican frontrunner Donald Trump, who called Shkreli a “spoiled brat,” and said it was “disgusting” what he did with the drug’s price, according to Fortune.
5. He Generated Controversy Again Recently After Purchasing an Exclusive Wu-Tung Clan Album for $2 Million
Shkreli has moved back into the spotlight in the past week after it was revealed he purchased the lone copy of a Wu-Tang Clan album for $2 million.
The rap group made only one copy of the album, Once Upon a Time in Shaolin, in 2014 and sold it to the highest bidder. RZA, the de facto leader of the Wu Tang Clan, told Forbes, “We’re about to put out a piece of art like nobody else has done in the history of music. We’re making a single-sale collector’s item. This is like someone having the scepter of an Egyptian king.”
The buyer of the album was forbidden from releasing it commercially for 88 years. Shkreli is allowed to release it on the Internet for free, or to play it himself.”
Shkreli said in a recent interview with Hip Hop Dx, ” I’m not going to play it for no reason. If Taylor Swift wants to come over and suck my d**k, I’ll play it for her.”