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 Shkreli, who has become a lightning rod for growing outrage over
soaring prescription drug prices, was arrested before dawn at the
tony Murray Hill Tower Apartments in midtown Manhattan. Clad in a
grey hoodie, the 32-year old could be seen being escorted by a slew
of law enforcement, including FBI, into a car.
It was a dramatic turn of events for Shkreli, who in recent months
became a pariah for his controversial remarks in the press and
taunts on social media outlets, including to Democratic presidential
candidate Bernie Sanders.
Many on social media said Shkreli was getting what he deserved. On
Twitter, the top hashtag and keyword related to his arrest was
#Karma. But ironically his downfall was not related to expensive
drug pricing.
In an odd foreshadowing of events, a video posted last night on his
YouTube page shows Shkreli answering a phone call during a live
stream in which a caller at 1:22:10 identifies himself as a "special
agent" before Shkreli appears to cut him off and hangs up.
(https://www.youtube.com/watch?v=I-4D6yj-cR4)
 Shkreli, who is chief executive officer of Turing Pharmaceuticals
and KaloBios Pharmaceuticals Inc <KBIO.O>, was charged in a federal
indictment filed in Brooklyn relating to his management of hedge
fund MSMB Capital Management and biopharmaceutical company Retrophin
Inc <RTRX.O>.
Brooklyn U.S. Attorney Robert Capers said at a news conference that
Shkreli "essentially ran his companies like a Ponzi scheme, where he
used each subsequent company to pay off defrauded investors in the
prior company."
Authorities highlighted what they called the "brazenness" of his
actions. Shkreli's efforts to conceal the fraud led him to use the
assets of Retrophin to pay off debts from his hedge funds, Capers
said.
Shkreli was charged with securities fraud, securities fraud
conspiracy and wire fraud conspiracy. The maximum sentence for the
top count is 20 years in prison.
"Mr. Shkreli is confident that he will be cleared of all charges
filed by the U.S. Attorney’s Office for the Eastern District of New
York (EDNY) and the Securities & Exchange Commission," a
representative said in a statement late Thursday.
"(He) also strongly denies the charges regarding the MSMB entities,
which involve complex accounting matters that the EDNY and SEC fail
to understand," the representative added.
The indictment, the result of an ongoing investigation, also charged
Evan Greebel, a former partner at law firm Katten Muchin Rosenman
who was Retrophin's outside counsel. Greebel, 42, was also arrested
on Thursday.
Shkreli and Greebel entered pleas of not guilty through their
lawyers.
Both were also sued in a related lawsuit by the U.S. Securities and
Exchange Commission, which also named New York-based hedge fund MSMB
Capital Management as a defendant.
 Later, a magistrate approved a $5 million bond package, allowing
Shkreli to go home after processing pre-trial paperwork. During the
bail hearing, unshaven Shkreli was wearing a black V-neck t-shirt
with blue jeans. He appeared relaxed, smiling at what appeared to be
family members in the courtroom.
When Shkreli left the courtroom, he was mobbed by reporters who
shouted questions about the allegations. Shkreli did not answer any
questions.
The securities fraud investigation predated a separate controversy
surrounding Shkreli since September, when reports surfaced that his
privately held Turing had raised the price of Daraprim, a
62-year-old treatment for a dangerous parasitic infection, to $750 a
tablet from $13.50 after acquiring it.
Asked if Shkreli raised drug prices to pay back investors, Capers
said that was not part of the investigation. "I wouldn't want to
speculate on his reasoning for trying to increase the price on those
drugs," he added.
Shares of KaloBios fell 53 percent to $11.03 in premarket trade
before being halted. Retrophin, which said in a statement that it
had fully cooperated with the government investigations of Shkreli,
closed down 1.9 percent at $20.94.
Turing and KaloBios declined to comment. Lawyers for Shkreli had no
comment.
[to top of second column] |
A lawyer for Greebel did not immediately respond to requests for
comment. In July, Greebel had joined the law firm Kaye Scholer,
which in a statement noted the "transactions in question predated
his arrival to the firm."
INTERNET OUTCAST
Social media lashed out at Shkreli over the Daraprim fiasco. He in
turn provoked his critics, and was often vocal on Twitter and other
online platforms about his business strategies, politics and even
musical tastes.
On Thursday, the online social network was buzzing with hashtags
#Shkreli and #Karma trending heavily. Many said Shkreli was getting
what he deserved and mocked his $2 million purchase of a Wu-Tang
Clan album.
In recent days, he even said that journalists do not "matter" and
asked about a Democratic presidential candidate, "If @BernieSanders
was a parasite what would he be?"
Sanders, who advocates a single payer healthcare system to control
drug prices, had refused to accept a donation from Shkreli, instead
giving the money to a health clinic in Washington, D.C.
Shkreli has several live stream YouTube sessions. In one, he can be
seen sitting at a computer in a plain white room with two electric
guitars and an amplifier visible behind him while he answers
infrequent questions from viewers.
In a video posted on Wednesday he flippantly referred to “the
miserable monotony of being ultra-rich.”
Shkreli is also an avid video game player who uses the handle
“Imagine Cerebral,” according to one of his Twitter posts. He is an
executive of a team of players, called Team Imagine, which
participates in the online multiplayer game League of Legends,
according to various media reports.
PONZI-LIKE SCHEME
Thursday's charges relate to Shkreli's management of MSMB Capital
Management, whose closure he announced in 2012, and his time as CEO
of Retrophin from 2012 to 2014.
The indictment said Shkreli made false representations to MSMB
investors to draw in $3 million in investments.
After MSMB suffered devastating trading losses in 2011 and ceased
trading, Shkreli for months sent fabricated updates to investors
touting profits of as high as 40 percent since inception, the
indictment said.
He also solicited $5 million from investors for another fund, MSMB
Healthcare Management LP, while concealing his performance managing
MSMB Capital and a prior fund and providing investors an inflated
valuation of his then-private firm Retrophin, the indictment said.
To pay back the MSMB funds' investors, Shkreli and Greebel
misappropriated $11 million in Retrophin assets through settlement
agreements and sham consulting deals, according to the indictment.
The case mirrors a lawsuit Retrophin filed in August against Shkreli
in federal court in Manhattan for $65 million, claiming he had used
his control over the company to enrich himself and pay off MSMB
investors' claims.
Shkreli has denied those allegations.
(Reporting by Nate Raymond and David Ingram; additional reporting by
Caroline Humer, Melissa Fares, Angela Moon and Lawrence Hurley;
Writing by Bernard Orr; Editing by Ted Kerr, Lisa Von Ahn, Noeleen
Walder and Diane Craft)
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