CEO Shkreli, who hiked price of HIV drug, arrested in embezzlement probe

Daraprim is one of numerous old drugs with limited competition whose makers have raised prices sharply.

The federal charges are believed to parallel a lawsuit filed against Mr. Shkreli in August by Retrophin, whose board ousted Mr. Shkreli as chief executive in September 2014.

Instead, prosecutors allege that Shkreli and his lawyer Evan Greebel conspired to siphon off funds from biotech company Retrophin in order to pay off debts at Shkreli’s hedge fund MSMB Capital Management, according to the indictment unsealed by the DoJ Thursday afternoon.

Martin Shkreli, 32, allegedly defrauded investors in two hedge funds he founded and in Retrophin, a pharmaceutical firm he previously led.

Retrophin has since sued Shkreli in federal court, seeking $65 million from him, accusing him of misusing the company’s cash and stock. And indie record label Collect Records said it was severing ties with Shkreli, who had been an investor.

Hedge fund manager Martin Shkreli posing with an Enigma machine, used by the Nazis to decode communications.

Shkreli has kept up media appearances since then, suggesting he would cut Daraprim’s price, then avoiding doing so, then saying he would cut the price, but only for certain health providers. He also said he had no intention to listen to it.

Neither Turing Pharmaceuticals nor Retrophin responded to requests for comment.

Shares of KaloBios fell about 50 percent to $US11.75 ($A16.30) in premarket trading after today’s arrest.

Capers said his office’s investigation began when Shkreli was still CEO of Retrophin.

Shkreli faced intense backlash after Turing Pharmaceuticals hiked the price of Daraprim, an antiparasite drug, from $18 to $750 earlier this year. He also tried to “buy” a meeting with presidential candidate Bernie Sanders, one of his staunchest detractors-an offer Sanders refused.

Shkreli did not do his reputation any favours by calling a journalist a “moron”, quoting defiant rap lyrics on Twitter and defending the price increase as a “great business decision”.

Shkreli was also unmasked this month as the buyer who reportedly paid $2 million for the only copy of the new Wu-Tang Clan album, “Once Upon a Time in Shaolin“. The drug is primarily used to treat toxoplasmosis, an infection that affects people with compromised immune systems, particularly those with HIV/AIDS and some forms of cancer.

After MSMB suffered devastating trading losses in 2011 and ceased trading, Mr Shkreli for months sent fabricated updates to investors touting profits of as high as 40 percent since inception, the indictment said.