Vilified drug exec arrested on unrelated fraud charges

Pharmaceutical entrepreneur Martin Shkreli was arrested by the FBI on Thursday, amid a federal investigation related to his former hedge fund and a drug company he previously headed. Shkreli, who began his career working for various hedge funds, in 2008 formed a partnership to launch MSMB Capital Management, which became known for filing requests to the Food and Drug Administration to reject products developed by Navidea Biopharmaceuticals (NAVB.A) and MannKind Corp (MNKD.O).

To pay back the MSMB funds’ investors, Shkreli and Greebel misappropriated $11 million (Rs 73.18 crore) in Retrophin assets through settlement agreements and sham consulting deals, according to the indictment.

“As alleged, Martin Shkreli engaged in multiple schemes to ensnare investors through a web of lies and deceit”, Robert Capers, US attorney for the Eastern District of NY, said in a statement.

The FBI’s New York Field Office made clear they did not confiscate the album, saying on Twitter there was “no seizure warrant at the arrest of Martin Shkreli today, which means we didn’t seize the Wu-Tang Clan album”.

“I had two guys parked outside of his house for six months” watching him, Shkreli told the rap news site HipHopDX in a tough-talking, expletive-filled interview published Wednesday, the day before his arrest.

Retrophin said its board removed Shkreli more than a year ago because of serious concerns about his conduct.

Shkreli said the company would cut the price of Daraprim. He was however freed on a $5 million bond.

Shkreli was charged with securities fraud, securities fraud conspiracy and wire fraud conspiracy. Evan Greebel’s current firm, Kaye Scholer, has been just as eager to distance themselves from the lawyer’s suspect activities. If found guilty on these fraud charges, he could face up to 20 years in prison.

Shkreli, whom the Federal Bureau of Investigation asserts ran his companies like a “Ponzi scheme”, sparked worldwide outrage for raising the price of a life-saving HIV pill by 5,000 per cent. Last Wednesday, he bought an elusive Wu-Tang clan album for US$2 million.

The drug, which has been around for 62 years, is the only approved treatment for toxoplasmosis, a rare parasitic disease that mainly strikes pregnant women, cancer patients and Aids patients.

The move drew remarks from candidates in the presidential campaign and headlines that called him such things as “America’s most hated man”, the “drug industry’s villain”, and “biotech’s bad boy”.

Retrophin has also filed a suit against Shkreli for allegedly spending vast amounts of their money to pay off angry claimants regarding his hedge fund mismanagement, but Shkreli claims that the suit “would not dent” him.

On Thursday, the Securities and Exchange Commission unsealed a civil case against Shkreli, accusing him of orchestrating “widespread fraudulent conduct” from 2009 through 2014.

With a mix of fresh marketing and pricing of unchanged drugs and efforts to develop improved versions of older drugs, Shkreli recast himself as both a Wall Street wizard and a medical pioneer.