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Shkreli, CEO Reviled for Drug Price Gouging, Arrested

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scruffydog

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Shkreli, CEO Reviled for Drug Price Gouging, Arrested on Securities Fraud Charges
32-year-old suspected of plundering Retrophin to pay debts

By Christie Smythe and Keri Geiger | December 17, 2015

A boyish drug company entrepreneur, who rocketed to infamy by jacking up the price of a life-saving pill from $13.50 to $750, was arrested by federal agents at his Manhattan home early Thursday morning on securities fraud related to a firm he founded.

Martin 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, however. Prosecutors in Brooklyn charged him with illegally taking stock from Retrophin Inc., a biotechnology firm he started in 2011, and using it to pay off debts from unrelated business dealings. He was later ousted from the company, where he’d been chief executive officer, and sued by its board.

In the case that closely tracks that suit, federal prosecutors accused Shkreli of engaging in a complicated shell game after his defunct hedge fund, MSMB Capital Management, lost millions. He is alleged to have made secret payoffs and set up sham consulting arrangements. A New York lawyer, Evan Greebel, was also arrested early Thursday. He's accused of conspiring with Shkreli in part of the scheme.

Retrophin replaced him as CEO “because of serious concerns about his conduct,” the company said in a statement. The company, which hasn’t been accused of any wrongdoing, has “fully cooperated with the government investigations into Mr. Shkreli.”

Shkreli’s lawyer didn’t immediately respond to requests for comment. Spokeswomen for Kaye Scholer LLP, where Greebel works, and Brooklyn U.S. Attorney Robert Capers declined to comment. Capers will discuss the case at a press conference Thursday in Brooklyn.

Shkreli’s extraordinary history—and current hold on the public imagination—makes the case more noteworthy than most involving securities fraud. The son of immigrants from Albania and Croatia who worked as janitors and raised him deep in working-class Brooklyn, Shkreli both epitomizes the American dream and sullies it. As a youth, he showed exceptional promise and independence and, after dropping out of an elite Manhattan high school, began his conquest of Wall Street before he was 20.

His name entered public consciousness after he raised the price more than 55-fold for Daraprim. It is the preferred treatment for a parasitic condition known as toxoplasmosis, which can be deadly for unborn babies and patients with compromised immune systems including those with HIV or cancer. His company, Turing Pharmaceuticals AG, bought the drug, moved it to a closed distribution system and instantly drove the price into the stratosphere.

The moves drew shocked rebukes from Congress, public-interest groups, doctors and presidential candidates, and cast an unwelcome spotlight on the rising prices of older drugs. Donald Trump called Shkreli a “spoiled brat,” and the BBC dubbed him the “most hated man in America.” Bernie Sanders, a Democratic presidential candidate, rejected a $2,700 campaign donation from him, directing it to an HIV clinic. A spokesman said in October that the campaign would not keep money “from this poster boy for drug company greed.”

Shkreli initially responded to the criticism by saying he would lower the Daraprim price and then changed his mind again. When Hillary Clinton tried one more time last month to get him to cut the cost, he dismissed her with the tweet “lol.” At a Forbes summit in New York this month, wearing a hooded sweatshirt, he said if he could have done it over, “I probably would have raised the price higher,” adding, “my investors expect me to maximize profits.”

In fact, it is not only his drug pricing that has turned him into an object of public derision. He recently spent millions on the only copy of a Wu-Tang Clan album that music fans would love to hear and then told Bloomberg Businessweek that he had no immediate plans to listen to it. He spars often on Twitter and message boards, parading his business strategies, musical tastes and politics; he live-streams from his office for long stretches.

And a range of investors has been after him for some time.

Retrophin sued Shkreli in August for misuse of company funds, claiming he engineered numerous transactions between investors in MSMB and the biotechnology firm. Similar allegations are laid out in the company's regulatory filings.

The company alleged in a complaint filed in Manhattan federal court that, through a disastrous trade with Merrill Lynch in 2011, Shkreli cost MSMB more than $7 million, leaving it virtually bankrupt.

Retrophin also asserts that Shkreli entered into payoff agreements with as many as 10 MSMB investors who lost money when the hedge fund became insolvent. Shkreli paid some investors through fake consulting agreements and others through unauthorized appropriations of stock and cash, the company alleged.

Complex financial maneuvers were used to conceal the payments, Retrophin said. For example, the company accused its former CEO of fraudulently reclassifying a $900,000 equity investment that MSMB made in Retrophin as a loan. He then allegedly had Retrophin pay off that loan to settle another unrelated legal dispute.

The Securities and Exchange Commission, which according to court documents opened an investigation into Shkreli in 2012, is expected to file a parallel civil complaint against him, according to people familiar with the matter.

Shkreli spoke cavalierly of the company’s lawsuit, saying, “The $65 million Retrophin wants from me would not dent me. I feel great. I’m licking my chops over the suits I’m going to file against them.”

Earlier, he had denied wrongdoing in a post on InvestorsHub after Retrophin disclosed it had received a subpoena from federal prosecutors and the preliminary findings from its own investigation of Shkreli. He called the company's allegations “completely false, untrue at best and defamatory at worst.”

“Every transaction I’ve ever made at Retrophin was done with outside counsel’s blessing,” he said on the investment blog in February, without identifying the lawyers.

Shkreli started his career interning for “Mad Money” host Jim Cramer while still a teenager. After recommending successful trades, Shkreli eventually set up his own hedge fund, quickly developing a reputation for trashing biotechnology stocks in online chatrooms and shorting them, to enormous profit.

Widely admired for his intellect and sharp eye, he pored over medical journals and self-trained in biology. He set up Retrophin to develop drugs and acquire older pharmaceuticals that could be sold for higher profits.

Turing, which is less than a year old and has raised $90 million in financing, has followed a similar strategy with the purchase of drug patents, including Daraprim.

Shkreli recently bought a majority stake in KaloBios Pharmaceuticals Inc. after Turing received a warning from the New York attorney general that the distribution network for Daraprim may violate antitrust laws. State officials made their concerns known to Turing and Shkreli in an Oct. 12 letter obtained by Bloomberg.

KaloBios recently acquired the license for benznidazole, a standard treatment for Chagas, a deadly parasitic infection most common in South and Central America. The firm announced plans to increase the cost from a couple hundred dollars for two months to a pricing structure like that for hepatitis-C drugs, which can run to nearly $100,000 for 12 weeks.

With the onslaught of federal charges and looming regulatory actions, Shkreli could be banned from running a public company, which could put the future of KaloBios into question. Trading in KaloBios shares was halted after the stock fell 53 percent. It’s less clear what the impact could be on Turing, which is privately held.

The charges also show that a small group of health care firms—ones that acquire the rights to drugs and significantly increase their prices—is drawing the scrutiny of regulators and prosecutors, with a possible chilling effect on aggressive drug-pricing strategies.

Legislators are already paying attention. A hearing of the Senate Special Committee on Aging on Dec. 9 scrutinized such tactics.

Before Shkreli started Turing, Retrophin raised the price of Thiola, used to treat a rare condition causing debilitating recurrences of kidney stones, from $1.50 a pill to $30.

“Some of these companies seem to act more like hedge funds than traditional pharmaceutical companies,” said Senator Susan Collins, a Maine Republican who ran the recent hearing.

George Scangos, CEO of biotechnology giant Biogen Inc., went further, saying in an interview, “Turing is to a research-based company like a loan shark is to a legitimate bank.”

http://www.bloomberg.com/features/2015-martin-shkreli-securities-fraud/
 

billyboy

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Sep 14, 2011
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4,491
I'd like to highlight this paragraph, since the arrest is for securities fraud; the SEC is going after him.


In the case that closely tracks that suit, federal prosecutors accused Shkreli of engaging in a complicated shell game after his defunct hedge fund, MSMB Capital Management, lost millions. He is alleged to have made secret payoffs and set up sham consulting arrangements. A New York lawyer, Evan Greebel, was also arrested early Thursday. He's accused of conspiring with Shkreli in part of the scheme.

His screwed up hedge fund was no secret. I'm surprised there wasn't more press about it when he fcuked up the drug pricing. I know people who were impacted when he raised the price of the drug. I hope he rots in hell.
 

Paichka

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May 14, 2011
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5,520
You have to appreciate the karma. I know I do. Hats off to Mark Baum, CEO of Imprimis, whose company compounded a drug containing the active ingredient and offered it to the public at $1 a pill. He said that even at the price, Imprimis would still turn a profit. That likely helped drive Shkreli to other money making schemes. What a dirtbag!
 

scruffydog

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361
Pharma CEO Martin Shkreli Calls Fraud Accusations 'Baseless' in Tweet

by Elisha Fieldstadt, NBC News

Disgraced pharma magnate Martin Shkreli defaulted to his defense-by-Twitter ways on Saturday to label allegations of fraud lobbed against him as "baseless and without merit."

Shkreli, 32, was arrested Thursday by the FBI on seven counts related to "widespread" securities fraud through a hedge fund and drug company he once ran.

An indictment said Shkreli and others orchestrated three interrelated scams from September 2009 through September 2014. Federal prosecutors allege that he illegally used assets from a biopharmaceutical company that he founded, Retrophin Inc., to pay off debts from a hedge fund he also managed — "like a Ponzi scheme."

Retrophin had previously sued Shkreli in federal court for $65 million, claiming he had used his control over Retrophin to pad his bank account and bring his hedge fund into the black.

Shkreli — known for his blustery personality — tweeted Saturday that he will triumph.

"I am confident I will prevail. The allegations against me are baseless and without merit."

Shkreli is no stranger to public scrutiny. Earlier this year, he similarly turned to Twitter to defend himself after he was dubbed "the most hated man in America" when he announced raising the price of an HIV-related drug by 5,000 percent.

Shkreli has also used his Twitter account to thank his supporters and post articles about himself since he posted a $5 million bond Thursday and resigned from his CEO post at drugmaker Turing Pharmaceuticals.

On Friday, he live-streamed more than three hours of his mundane evening in his New York apartment, where he spent chatting with some of the hundreds of curious people who tuned in.

http://www.nbcnews.com/news/us-news...alls-fraud-accusations-baseless-tweet-n483166


Martin Shkreli Indictment: http://www.scribd.com/doc/293530336/1-main
 

Sassypat

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I'd like to highlight this paragraph, since the arrest is for securities fraud; the SEC is going after him.


In the case that closely tracks that suit, federal prosecutors accused Shkreli of engaging in a complicated shell game after his defunct hedge fund, MSMB Capital Management, lost millions. He is alleged to have made secret payoffs and set up sham consulting arrangements. A New York lawyer, Evan Greebel, was also arrested early Thursday. He's accused of conspiring with Shkreli in part of the scheme.

His screwed up hedge fund was no secret. I'm surprised there wasn't more press about it when he fcuked up the drug pricing. I know people who were impacted when he raised the price of the drug. I hope he rots in hell.

I remember the original price hike--I think I read it on Fierce Biotech or something like that. It's people like him that I want to see living on the streets in Siberia...sadly, three meals a day in a jail cell is too good for him!
 

steve12345

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Sep 23, 2011
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1,768
I knew this ALL along. The drug in question was made in 1958. TRUST ME. I am in the pharma industry and ALL costs associated with its development were paid off about by 1963. From then on it is total profit ! There is NO way the cost to make this drug is the OUTRAGOUS price the CROOK stated.

This WHOLE scenario tells me that the prices we pay for stuff on this Forum is about correct. Generic Viagra about $ 1.50 to $ 2.oo per pill when the USA maker wants $ 60 or more per pill !

The crook in this case was asking something INSANE !. The FACT this new COMPOUNDING Company says they are making a profit at selling the same drug at $1 a pill tells me and the WORLD how crooked this guy was. I hope he gets what is coming to him.

I WOULD LOOOOOOOOVE to be on the JURY! !
 
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MMH

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I read/saw an interview with him yesterday. When asked if he would do anything differently if he could basically get a do-over on the Daraprim incident, he said yes, he would have raised the price even more than he did. What a callous, self-centered dirtbag!
 

steve12345

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The above comments tell me the guy has no remorse and needs a STIFF Jail Sentence. This will give him time to rethink things through !
 

scruffydog

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Martin Shkreli is in bigger trouble than he thought

Federal prosecutors said Tuesday they are mulling additional securities fraud charges against pharmaceutical price-hike bad boy Martin Shkreli.

Assistant US Attorney Winston Paes told Judge Kiyo Matsumoto that the charges would relate to further allegations that Shkreli and his co-defendant Evan Greebel “defrauded” Shkreli’s biopharmaceutical firm Retrophin.

The superseding indictment containing the new charges, which were not specifically disclosed during a brief hearing in Brooklyn federal court, would be filed within a month and is not expected to add additional defendants, Paes said.

Shkreli — who became one of most hated men in America for jacking up the price of lifesaving cancer drug Daraprim by more than 5,000 percent in order to turn a profit — is charged with running an unrelated $11 million Ponzi scheme, feds said.

The former CEO of Turing Pharmaceuticals allegedly paid off debts from two failing hedge funds and covered some personal expenses by skimming assets from Retrophin.

The feds allege Shkreli, 33, and Greebel, an attorney for Retrophin, tried to cover up their money maneuvering when auditors started getting suspicious.

Lawyers for the two men said they first learned of the potential superseding indictment Tuesday morning.

Shkreli, donning a mismatched gray suit and scuffed dress shoes, said nothing as his high-powered attorney Benjamin Brafman addressed the throng of reporters outside the courthouse.

“Substantively, we do not believe that this indictment will change in any way that affects Mr. Shkreli in a negative fashion and we still believe that the charges in this case are very defensible,” Brafman said.

Both Shkreli and Greebel, who were arrested last December, have pleaded not guilty and each faces up to 20 years in prison.

They’ll return to court June 6.

The government has turned over to the defense about 70 gigabytes of evidence in preparation for a trial, according to Paes.

Shkreli has also drawn ire from die-hard Wu-Tang Clan fans after plunking down $2 million for the gangsta rap group’s one-of-a-kind album — and bragging that he bought it only “to keep it from the people.”

http://nypost.com/2016/05/03/martin-shkreli-is-in-bigger-trouble-than-he-thought/
 

athletic98034

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@scruffydog Shkreli is a douche and not respected by any one on wall street. His etrade account went from 35mm to 5mm. After all off the lawsuits he will be broke and most likely in jail. He helped smash the whole biotech industry. Average valuation down about 40-50%.
 

Ellyn

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The man is at best someone with a narcissistic personality disorder and at worst a sociopath, and when prosecutors look to supersede (basically upgrade) an indictment no good usually comes of it for the defendant. If this guy is convicted that might actually be proof that there is a God after all. Unfortunately the charges don't involve his (former) company's predatory pricing of a generic drug, but at least he (and that creep from Valeant Pharm) are drawing a good bit of attention to this type of pricing scheme.
 

steve12345

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This guy could have gotten away with his crimes if he did not go overboard with his actions. He is young and naive. If he did all his actions in a low key way ( money moved around ) and did not go up 5000 % he would have gotten away with it. All the crimianls who get caught do so by either having a big mouth or overdoing it. I can guarantee there are MANY crooks out there but they are smart and stay low key and move funds around in small amounts and do not raise prices a massive amount.
 
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athletic98034

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@Ellyn A sociopath is exactly what I have been calling him to my friends. Great call. He might not end up in jail, but I bet he ends up broke. No one going to be willing to do business with him going forward. You been tracking billionaire Bill Ackman and his investment in Valeant? He totally rat ****ed himself.
 
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