A jury has found former pharmaceutical CEO and hedge fund manager Martin Shkreli guilty of securities fraud in connection with his two hedge funds, MSMB Capital and MSMB Healthcare, as well as of conspiracy to commit securities fraud involving shares of the drug company Retrophin, which he founded.
Prosecutors had said that Shkreli misled investors, losing their money on bad stock picks while scheming to try recover millions of dollars of these losses. At one point, Shkreli claimed he had $40M in one hedge fund when it had only $300 in the bank.
That said, prosecutors experienced some challenges in proving their criminal case against the ex-hedge fund manager. For example, during the trial, a number of rich Texan financiers admitted that Shkreli’s scam made them money, sometimes even double or triple of what they invested, when Retrophin’s stock went public.
Shkreli was arrested in 2015 on charges that he took $11M in stock and cash from Retrophin to repay hedge fund investors. Previous to that, he’d garnered lots of negative attention when he raised the price of Daraprim, an anti-parasitic drug, from $13.50 to $750/pill. The drug was from Turing Pharmaceuticals AG, which is another company that Shkreli founded. He angered so many people with the price hike that quite a number of candidates under consideration for the jury in his criminal trial had to be dismissed because they already had very negative feelings about him.
Prosecutors accused Shkreli of running a Ponzi scam, using assets from Retrophin to pay off MSMB investors and costing the pharmaceutical company and investors $11M. Evidence showed that Shkreli compensated Retrophin investors for their losses in secret until they were made whole and/or profited.
During his defense, Shkreli’s lawyers tried to argue that no one appeared to have been harmed in the long run by his fraud. They noted that while hedge fund investors sometimes had to wait months or even years, ultimately they did profit, as did Retrophin shareholders.
Now, Shkreli is facing up to 20 years behind bars.
Martin Shkreli, Convicted of Securities Fraud, Conspiracy, CNN, August 4, 2017
‘Pharma Bro’ Martin Shkreli convicted in fraud trial, NY Post, August 4, 2017