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Martin Shkreli, the infamous “Pharma Bro,” has been found guilty of three charges by a federal jury in New York City. He now faces several years in prison when sentenced at a later date.
Shkreli, a 34-year-old former pharmaceuticals company CEO and hedge fund manager who has been called the “most hated man in America and the “face of corporate greed,” was charged in the Eastern District of New York with eight counts of securities and wire fraud.
He was found guilty of three of those charges, including conspiracy to commit securities fraud and two counts of securities fraud, CNBC reports. He was found not guilty on five counts, including the wire fraud-related charges, according to CNBC. He now faces up to 20 years in prison. A sentencing date has not been set. It is also not clear if he plans to appeal. Shkreli has loudly maintained his innocence since his arrest.
The jury deliberated for more than four days following a trial in Brooklyn before Judge Kiyo A. Matsumoto that began June 26. The jury began deliberating July 31 and reached a verdict Friday afternoon about 2 p.m.
Shkreli previously ran two failed hedge funds, MSMB Healthcare and MSMB Capital Management and was the boss of Retrophin Inc., a pharmaceuticals company. The charges against Shkreli accused him of defrauding investors in the hedge funds and Retrophin. He was also the CEO of Turing Pharmaceuticals until his arrest and gained notoriety in that role after purchasing the rights to the drug Daraprim, which is used to treat a rare parasitic infection that targets pregnant women and AIDS and cancer patients, and hiking its price. The 60-year-old drug’s price was raised from $13.50 a tablet to $750.
Shkreli has been free on $5 million bail since his arrest and will remain out of custody until his sentencing, which might not occur for several weeks. Federal sentences are decided by the judge, based on guidelines, and he is not likely to receive a sentence at the high end of the range. A pre-sentence report will be prepared by a federal probation officer, and both the prosecutors and Shkreli’s defense team will be allowed to file memorandums to recommend a sentence for Shkreli.
Shkreli is also being sued by Retrophin for $65 million, Forbes reports. He has called the accusations “preposterous.”
Here’s what you need to know:
1. Shkreli Was Arrested Amid Growing Hatred for His ‘Pharma Bro’ Persona & After a Price-Gouging Scandal, but the Fraud Charges Aren’t Related
Martin Shkreli during his arrest in 2015.
Martin Shkreli was arrested in December 2015 along with his attorney, Evan Greebel. He was arrested December 17, 2015, by FBI agents and led from the Murray Hill Tower Apartments in Manhattan and escorted to a car.
Shkreli was 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.
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.”
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:
“As alleged, Martin Shkreli engaged in multiple schemes to ensnare investors through a web of lies and deceit,” said Robert Capers, then-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.”
Then-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.”
An eighth charge was brought against Shkreli in June 2016 accusing him of conspiracy to commit securities fraud in the unrestricted securities of his former pharmaceutical company, Retrophin, according to NBC News. The new charge, brought by a grand jury in a superseding indictment, accuses him of hiding his control of stock, which was transferred to seven employees, NBC News reported.
The charges against him are not related to his time at Turing and the alleged price-gouging of the AIDS and cancer drugs that made him a household name.
Charges against Greebel are still pending after both men successfully argued that their cases should be heard separately. Greebel has pleaded not guilty.
“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,” 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.”
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. He Was Called ‘Evil,’ a ‘Snake’ & a ‘D*ck’ by Potential Jurors, Leading to a Lengthy Selection Process
Shkreli outside of court in 2016.
Shkreli’s notoriety made for a difficult jury selection, causing the process to stretch for three days. A jury of five men and seven women was finally selected on July 28 after more than 250 potential jurors were dismissed, ABC News reported.
During the process, Shkreli faced harsh words from several members of the Brooklyn jury pool, according to the New York Post.
“In my head, I said, ‘That’s a snake,’” one woman said, according to the Post. A man said, “I think he’s a very evil man.”
A young man mentioned Shkreli’s purchase of the Wu-Tang Clan album “Once Upon a Time in Shaolin” for $2 million and told the judge he couldn’t be a fair juror, ” “Because he kind of looks like a dick.”
Others called him “the most hated man in America” and “the face of corporate greed,” the New York Times reported.
One man told the judge, ““This is the price gouger of drugs. My kids are on some of these drugs. This impacts my kids.”
A woman “mimicked throttling someone” while talking about “the AIDS drug” price hike, according to the Times, and told the judge, “Who does that? A person that puts profit over everything else?”
3. Prosecutors Argued Shkreli Lied to Investors While Falsely Claiming He Was ‘Some Sort of Genius in the Investing Industry’
Martin Shkreli listens during a hearing of the House Oversight and Government Reform Committee on Capitol Hill February 4, 2016.
Federal prosecutors argued in their closing argument that Shkreli repeatedly lied to his investors in a brazen con, according to the New York Times.
Shkreli “lied to investors to get their money into the funds and then lied to them so they wouldn’t take it out,” Assistant U.S. Attorney Alixandra Smith told jurors on July 5. She said investors testified that Shkreli had claimed to be managing a fund worth up to $40 million, when it actually only held a few hundred dollars. Smith said Shrekli then used a Ponzi-like scheme to raid a second fund to pay back an investor who had asked for his money, according to the Times.
“The defendant was lying not only about the ability to get a redemption, but also about where that money was coming from,” Smith told the jury.
Smith said Shkreli also tried to portray himself to new investors as a hotshot Wall Street whiz who had graduated from Columbia University, which he did not, while making bad stock picks and blowing up his fund.
She said claims “that he was some sort of genius in the investing industry were completely untrue.”
Prosecutors did admit that the investors got there money back, through a combination of cash and Retrophin shares, and nobody lost money, according to Forbes.
“Investors may have made their money back, but Mr. Shkreli still committed fraud,” assistant U.S. Attorney Jacquelyn Kasulis said in court.
She added, if “you rob a bank, then you rob another bank to pay back the first bank, you still robbed the first bank. You can’t rob Peter to pay Paul. Just because the defendant got lucky and Retrophin became a success years later … it doesn’t excuse fraud,” according to the Washington Post.
Smith told the jury in her closing argument that Shkreli told “lies upon lies,” and “Depending on which investors he is talking to, he changes the story” and knew he “he would get people to give him money.”
4. The Defense Claimed Shkreli Was a ‘Hermit Scientist’ With No People Skills Who Doubled or Tripled His High-Roller Investors Money
Shkreli did not testify during the trial that lasted more than five weeks. He told the judge on July 24 that he would not be taking the stand in his own defense, Bloomberg reported.
He explained his decision on Facebook with a Jay-Z song quote, “plead the fif when it comes to the fam im like a dog i dont speak but i understand.”
During closing arguments, Shkreli’s defense attorney, Ben Brafman, portrayed him as a “misunderstood eccentric” who slept on the floor of his office in a sleeping bag for two years while launching a successful pharmaceutical company, according to the Associated Press. Brafman said his company made the alleged victims of his fraud rich.
“Who does that if you’re committing a fraud and you have millions of dollars in people’s money? He has no life. He’s the hermit scientist,” Brafman told the jury, according to the AP. “(He’s) not a Ponzi guy who’s taking money and buying a Cadillac or a yacht.”
Brafman said his client can be annoying and, “in terms of people skills, he’s impossible.” He said investors “found him strange. They found him weird. And they gave him money. Why? Because they recognized genius,” Brafman said.
Brafman, who has told CNN Money he thinks Shkreli is a “special kid who could cure cancer if left alone,” called the complaints of the investors “rich people B.S.,” according to the Washington Post.
Attorney Benjamin Brafman and ex-pharmaceutical executive Martin Shkreli arrive at the U.S. District Court for the Eastern District of New York, August 1, 2017.
“I feel like a life guard on a beach. It is my worst fear to not be able to rescue someone. There is Martin floating in his own little world, I could swim out and save him in two minutes, unless a current takes him away,” Brafman told the jury, the Post reported. “I need your help to try and save Martin.”
During the four weeks of testimony, jurors heard “riveting” stories about Shkreli’s interactions with employees and investors, according to the Post. Brafman told the jury that Shkreli is “not completely normal,” according to those who interacted with him in his role running the hedge funds, and pointed out that one of them compared him to Dustin Hoffman’s autistic savant character in “Rain Man.”
Brafman told the jury, “Martin travels to the beat of his own drum. If Martin Shkreli actually believes what he says is true then I say it rises to a defense of good faith.”
Brafman and Shkreli.
During opening arguments, Brafman claimed Shkreli was bullied by older investors and Retrophin employees, who questioned his sexuality and whether he was autistic, according to the New York Times.
“He was not what they thought a CEO should look like. These people wanted him to blow up. They wrapped him in oil-soaked rags hoping someone would throw a match,” Brafman said, while Shkreli grinned, according to the New York Post.
“Whether Martin is gay or straight or bisexual is irrelevant; it’s 2017,” Mr. Brafman said in his opening statement. “Get a life, board of Retrophin. The Retrophin board? A bunch of thugs.”
He added, “Is he strange? Yes,” but “Every single government witness will concur that Martin Shkreli, despite his flaws and his personality, is brilliant beyond words.”
One investor who testified Sarah Hassan, said she felt betrayed by Shkreli, but admitted she quadrupled her $400,000 investment, according to Forbes.
Brafman said in court, “He sometimes said some things to an investor on a certain date, but not everything he said was 100 percent accurate, but he was truthful to the mission of making Retrophin a success.”
5. Shkreli, Who Had to Be Told to Be Quiet Near Court by the Judge, Was Livestreaming on Facebook & YouTube After Each Day of the Trial
Martin Shkreli.
Marin Shkreli continued to host livestream videos on YouTube and post on Facebook, including taking shots at Anthony Scaramucci, writing “in for comms director,” on July 31 after “the Mooch” was fired, and bashing the U.S. Attorney’s office as the trial was going on.
“My case is a silly witch hunt perpetrated by self-serving prosecutors. Thankfully my amazing attorney sent them back to junior varsity where they belong. Drain the swamp. Drain the sewer that is the DOJ. MAGA,” he wrote on July 27, after the second day of his trial.
Shkreli, a Brooklyn native whose parents immigrated to the U.S. from Albania and Croatia, attended Hunter College High School and graduated from Baruch College in 2014. After college, Shkreli worked at Cramer, Berkowitz and Company, the hedge fund founded by TV personality Jim Cramer. He began working on Wall Street as an intern at the same company when he was 17. After four years there, he worked as a financial analyst at Intrepid Capital Management and UBS Wealth Management before founding his first hedge fund, Elea Capital Management, in 2006.
Shkreli has claimed he is worth $70 million, down from a purported $100 million prior to his arrest, according to Bloomberg. He has said he owns a Picasso painting, an unreleased album, the original “Enigma” machines used to break German codes during World War II and an unreleased Wu Tang Clan album he spent $2 million on, Bloomberg reported He has paid his attorneys $4.8 million, according to Bloomberg, and recently promised a Princeton University student $40,000 for solving a mathematical proof. He also offered $100,000 reward in the Seth Rich murder case. But his attorney said he often boasts about his self worth on Twitter. He was arguing that Shkreli’s bail should be reduced from $5 million to $2 million so he can begin paying back creditors.
“Tweeting has become, unfortunately so fashionable, but it’s not always true. When people tweet, they don’t always mean what they say,” his attorney wrote. “Some of these preposterous statements Mr. Shkreli made are his way to remain relevant.”
Shkreli also shared a story from Crain’s New York with the headline “Pharma’s bad boy is getting a raw deal,” writing, “Finally, a thoughtful article,” just hours after the jury began its deliberations.
Shkreli, who often holds marathon livestreams from his computer chair in his home office, streamed a video for several hours the night before the verdict was reached.
Prosecutors sought a gag order against Shkreli on July 3 after he went on a rant to reporters outside the courthouse, calling the assistant U.S. attorneys bringing the case against him “junior varsity, ” and complained that people blame him for everything.
“Since the empanelment of the jury, Shkreli has engaged with the press — in apparent contravention of the instructions of his lawyers — in the courthouse itself, directly outside the courthouse and on digital media in a manner that risks tainting the jury,” prosecutors said in their motion. The prosecutors also said they believed Shkreli was posting using a pseudonym on Twitter, a platform he is banned from after his harassment of journalist Lauren Duca.
His attorney, Benjamin Braufman, wrote in response, “his comments are the somewhat natural, though unfortunate, consequence of a young man with a demonstrated history of significant anxiety being at the center of a supremely difficult time in his life.”
Judge Kiyo A. Matsumoto eventually ordered Shkreli to stop talking about the case around the courthouse, where he could potentially influence jurors, USA Today reported.
Shkreli’s activity on social media and with journalists was part of the reason his co-defendant, attorney Evan Greebel, sought separate trials.
“Nothing has been able to stop — and nothing will be able to stop — Mr. Shkreli from trying to turn this trial into a circus as part of a deliberate strategy to obtain jury nullification rather than have the jury focus on and carefully consider the evidence,” Greebel’s lawyers said in a court filing.
His attorney told CNN Money he “would prefer that Mr. Shkreli not live stream during trial” but said his client “did not intentionally violate the law [and] is confident he will be acquitted. While I can control his conduct in the courtroom, I cannot control his life nor do I have the right to interfere with his personal life.”
