Martin Shkreli, the drug company entrepreneur who sparked outrage for hiking up the price of a life-saving drugs, was arrested by the FBI at his Manhattan apartment early Thursday morning.
Shkreli, currently the CEO of Turing Pharmaceuticals has been charged with securities fraud relating to a drug company he previously headed, Retrophin, and a hedge fund, MSMB Capital Management, where he was a fund manager.
BYPASS THE CENSORS
Sign up to get unfiltered news delivered straight to your inbox.
The 32 year old pleaded not guilty in Brooklyn federal court and was freed on a $5 million bond.
Bloomberg.com reports: Shkreli, 32, ignited a firestorm over drug prices in September and became a symbol of defiant greed. The federal case against him has nothing to do with pharmaceutical costs but suggests he was running a Madoff-style Ponzi scheme on a much smaller scale. Prosecutors in Brooklyn charged him with illegally taking assets from Retrophin Inc., a biotechnology firm he started in 2011, and using it to pay debts from unrelated business dealings. He was later ousted from the company, where he’d been chief executive officer, and sued by its board.
Federal prosecutors accuse Shkreli of engaging in a complicated shell game after a hedge fund he started lost millions. He is alleged to have made secret payoffs and set up sham consulting arrangements. A New York lawyer, Evan Greebel, also arrested early Thursday, is accused of conspiring with him. He too pleaded not guilty and was freed on a $1 million bond.
Spokeswomen for Katten Muchin Rosenman LLP where Greebel worked during the time in question, and Kaye Scholer, where he works now, declined comment. Greebel, who served as lead outside counsel to Retrophin from 2012 to 2014, joined Kaye Scholer in July, after the activities detailed in the indictment.
In a federal indictment and complaint by the Securities and Exchange Commission, authorities outline years of investment losses and lies Shkreli allegedly told investors almost from the moment he began managing money. By his mid-20s, they said, he got nine investors to place $3 million with him, lost their money and covered it up. At one point, his fund’s accounts had a balance of $331.
He covered up his losses with scheme after scheme, telling investors that his returns were as high as 35.8 percent when he was down 18 percent. He used client money to pay for clothing, food and medical expenses and lied to the broker handling his fund’s accounts, authorities said.
“Shkreli essentially ran his company like a Ponzi scheme where he used each subsequent company to pay off defrauded investors from the prior company,” Brooklyn U.S. Attorney Robert Capers said at a press conference. Shkreli was walked through a gaggle of photographers outside FBI headquarters in Manhattan.
However, Shkreli’s legal troubles don’t end with the federal charges and the Retrophin lawsuit.
Turing Pharmaceuticals is also facing an antitrust probe by New York Attorney General Eric Schneiderman. The state’s top lawyer is concerned that Turing might be trying to prevent generic versions of Daraprim from being produce by restricting distribution of the drug specifically so that generic drug manufacturers can’t get the samples they need to create their own version.