‘Pharma bro’ Martin Shkreli arrested on federal securities fraud charges
Martin Shkreli, the price-gouging pharmaceutical company executive, was arrested early Thursday morning on securities fraud charges.
The 32-year-old CEO of Turing Pharmaceuticals AG became known as the most hated man on the Internet after buying the rights to a life-saving medication and jacking up the price from $13.50 to $750 per pill.
Federal investigators charged Shkreli with illegally taking stock from Retrophin Inc., another biotech firm he founded in 2011, to pay off debts from unrelated business dealings, reported Bloomberg.
He was “unceremoniously dumped” from that company in September 2014 and sued by its board.
The lawsuit alleges that Shkreli used a series of “extra-legal maneuvers” to essentially turn Retrophin into his personal bank — and now the company seeks every bit of money he made off the company.
A filing made in November 2014 with the U.S. Securities and Exchange Commission showed Shkreli pulled in nearly $3 million in gross proceeds as he continued selling company stock while simultaneously urging investors to buy into Retrophin — which the rapper-quoting then-CEO hyped on his Twitter account.
Shkreli began plundering Retrophin after his hedge fund — which eventually collapsed — made a “disastrous” investment in Orexigen, reported FierceBiotech.
MSMB Capital Management lost more than $7 million and went “virtually bankrupt” after the 2011 investment.
Shkreli finally told investors he was dissolving the hedge fund to focus on Retrophin — and he offered to redeem their investments in cash or stock in his new company.
The suit accuses Shkreli of using complex financial maneuvers to conceal the payments, such as reclassifying a $900,000 equity investment that MSMB made in Retrophin as a loan and then having the company pay off that loan to settle an unrelated legal dispute.
The Securities and Exchange Commission, which launched an investigation of Shkreli in 2012, is expected to file a parallel civil complaint against him, according to Bloomberg.
Shares of KaloBios, which named Shkreli its CEO and board chairman last month, plunged 50 percent in pre-market trading before trading was stopped.
The lawsuit also points out that Shkreli was accused in December 2013 of threatening a former MSMB employee and his family on social media and in written letters.
“I hope to see you and your four children homeless and will do whatever I can to assure this,” the former employee Timothy Pierotti, claimed his old boss had written in a letter to his wife.
That former employee, Timothy Pierotti, had reached an out-of-court settlement of a lawsuit filed against him by Retrophin, said Shkreli contacted his children on Facebook and accused their father of betraying him and stealing $3 million from him.