Vilified for drug pricing, CEO Shkreli busted for securities fraud

Thu Dec 17, 2015 8:38pm EST
 
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By Nate Raymond and David Ingram

NEW YORK (Reuters) - Martin Shkreli, the boyish pharmaceutical entrepreneur who caused a public uproar after he drastically raised the price of a life-saving prescription drug, was arrested on Thursday for engaging in what U.S. prosecutors said was a Ponzi-like scheme at his former hedge fund and a pharmaceutical company he previously headed.

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. (here)

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: Quote).

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.   Continued...

 
Martin Shkreli departs the U.S. Federal Court after an arraignment following him being charged in a federal indictment filed in Brooklyn, December 17, 2015. REUTERS/Lucas Jackson