Pharma’s bad boy: Livestreaming, rap-loving CEO Martin Shkreli faces fraud charges

The investigation follows recent controversy surrounding Shkreli, whose Turing Pharmaceuticals made the decision to raise the prices of a 62-year-old treatment for a parasitic infection from $13.50 a tablet to $750 tablet.

On Thursday, Shkreli got his comeuppance when the Department of Justice announced he and his lawyer had been indicted in a multimillion dollar securities fraud. Retrophin went public in December 2012.

Shkreli also failed to tell investors that he had lost all the money he managed at another hedge fund, and owed Lehman Brothers $2.3 million for a default judgment related to his trading activity, according to the indictment.

After the initial furore, it emerged that during Shkreli’s term as CEO and founder of pharmaceutical company Retrophin, it acquired the rights to sell Thiola, used to treat cystinuria, a rare, incurable condition which causes persistent and painful kidney stones.

Federal agents arrested Shkreli this morning in his apartment in NY, and he now pleads not guilty against securities fraud charges.

Shkreli was also charged by the Securities and Exchange Commission. He made “made material misrepresentations and omissions to investors and prospective investors” during this time, the complaint said.

“Essentially, he ran his companies like a Ponzi scheme where he used each subsequent company to pay off his investors from a prior company”, the U.S. attorney Robert Capers said in a press conference.

Capers added that Shkreli used Retrophin as his “personal piggy bank”.

The allegations against Shkreli said that he was at least 26 years old – he is now 32 – when he engaged in financial fraud. Retrophin did not receive any legitimate consulting services based on these sham agreements, but paid more than $7.6 million in cash and RTRX stock to settle claims that the auditors had previously determined were not the responsibility of Retrophin.

KaloBios shares fell 50 percent to $11.75 in NY trading before the market opened.

“Mr Shkreli also strongly denies the charges regarding the MSMB entries, which involve complex accounting matters that the EDNY and SEC fail to understand”.

In August, Shkreli was sued by Retrophin. Many of these alleged schemes would have benefited MSMB Capital Management. And indie record label Collect Records said it was severing ties with Shkreli, who had been an investor.

The indictment said Shkreli and Greebel, along with others, orchestrated three interrelated fraud schemes from September 2009 through September 2014. He bought the company’s outstanding stock as it was about to fold and kept the company in operation. In another, attorneys for both sides indicated they would seek resolution in “private mediation”. The lawsuit looks similar to the federal case against Shkreli.