Fraud, karma send Martin Shkreli to jail

Bookbinder says the drug-pricing scandal no doubt brought added scrutiny to Shkreli’s business dealings – scrutiny the entrepreneur nearly invited by his outrageous response.

It began after Turing Pharmaceuticals spent $55 million in August for the USA rights to sell Daraprim, a 62-year-old drug for a rare parasitic infection, and promptly raised the price from $13.50 to $750 per pill. The company, however, went on to conduct an investigation.

Last month, an investing company in which he led acquired majority for KaloBios Pharmaceuticals, which owns a drug called Benznidazole, one of the two drugs that can cure Chagas disease that’s common in the Americas. Retrophin went public in December 2012. He later attended Baruch College and during his studies landed a job as a clerk at the hedge fund, Cramer, Berkowitz & Company (Co-founded by Jim Cramer, the zany host of CNBC’s “Mad Money”).

He also prevented investors from redeeming their money at MSMB Capital and is accused of misusing the hedge fund’s assets. Greebel, 42, in July had joined the law firm Kaye Scholer, which in a statement noted the “transactions in question predated his arrival to the firm”. No longer merely vilified in the press as crass and compassionless, he was under arrest for alleged securities fraud, though unrelated to the pill affair.

Shkreli was also charged by the Securities and Exchange Commission.

In a video posted last night on his YouTube page, Shkreli is seen answering a phone call during a live stream in which the caller identifies himself as a “special agent” before Shkreli appears to cut him off and hangs up. Shkreli and Greebel, together with others, then devised an alternative approach to settle with the remaining defrauded hedge fund investors, namely, settlement agreements under the guise of consulting agreements. However, the inveterate capitalist, who also grew up in Brooklyn, noted that he’d expect something in return. Shkreli’s efforts to hide the fraud led him to use the assets of Retrophin to pay off debts from his hedge funds, Capers said. But recent reports by Forbes and other news organizations said Shkreli has since changed his mind about lowering the price. The company said it had cooperated with investigators. That would be as if an investor purchased a share in Microsoft and then later demanded full repayment of the purchase price plus interest, regardless of the market price for the stock.

Shkreli denies the allegations of fraud and was released on a $5 million bond because he is incredibly wealthy and a very eligible bachelor that many women want to sleep with. The South San Francisco, California, company had been winding down operations when Shkreli and the group swooped in to take control and committed to a $10 million equity financing facility. In a 2010 email, he told investors his MSMB Capital Management fund had returned 37.77 percent since its founding, when in fact it had sustained losses of 18 percent. But federal authorities didn’t arrest him over price-gouging. In another, attorneys for both sides indicated they would seek resolution in “private mediation”.