Martin Shkreli could face up to 20 years for his “Ponzi-like” fraudulent activity as a hedge fund manager and as CEO of Retrophin, U.S. Attorney Robert Capers said in a press conference today regarding his arrest.
Shkreli “engaged in multiple schemes to ensnare investors through an outrageous web of lies and deceit,” Capers said.
When asked whether Shkreli may have hiked up the price of toxoplasmosis drug Daraprim to pay off prior debts, Capers said: “That’s not part of our investigation.”
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An indictment against Shkreli was unsealed Thursday at the U.S. Attorney’s office in Brooklyn. He was arrested in the morning at his Manhattan apartment for securities fraud. Also arrested was Evan Greebel, who the SEC says worked as Shkreli’s lawyer while at Retrophin. He was charged with wire fraud conspiracy.
“Shkreli, as Retrophin’s chief executive officer, was entrusted with proecting both Retrophin and shareholders assets. Instead, he abused that power and used the public company’s assets to pay off his own personal debts,” Capers said. “And Greebel, who was being paid by Retrophin to represent the company’s interest, used his law license and his training as the cover so Shkreli could perpetrate his fraudulent goals.”
The investigation has nothing to do with Shkreli’s price gouging this year at Turing Pharmaceuticals. Rather, the allegations against Shkreli run back to 2010, when he launched hedge fund MSMB Capital Management.
“As alleged in the indictment, Shkreli essentially ran his companies like a Ponzi scheme, where he used each subsequent company to pay off the defrauded investors in the prior company,” Capers said at the presser.
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Authorities meticulously outlined Shkreli’s misdeeds since 2010. The Washington Post sums it up well:
Federal prosecutors alleged that for five years Shkreli lied to investors in two hedge funds and bio-pharmaceutical company Retrophin, all of which he founded. After losing money on stock bets he made through one hedge fund, Shkreli allegedly started another and used his new investors money to pay off those who had lost money on the first fund. Then, as pressure was building, Shkreli started Retrophin, which was publicly traded, and used cash and stock from that company to settle with other disgruntled investors, prosecutors contended.
Shkreli fraudulently induced Retrophin to pay stock and cash to these disgruntled investors, disguising payments from Retrophin as consulting fees.
“Shkreli had Retrophin’s corporate secretary and attorney Greebel draft sham consulting agreements, although Shkreli and Greebel both knew that the agreement’s true purpose was to settle claims against Shrkeli – and not to provide Retrophin with consulting services,” Andrew Ceresney of the SEC said in the presser.
Just last week, Shkreli made waves for paying a stunning $2 million for exclusive access to the new Wu Tang album.
“We’re not aware of where he got the funds for the Wu Tang album,” Capers said.
Photo: Getty Images
