One of Big Pharma’s most hated men was cuffed earlier this morning.
Martin Shkreli, often referred to as “the most hated man in America,” was arrested today (Thursday morning) by the federal authorities for security fraud charges. He’s notoriously known for sparking outrage after his privately held startup, Turing Pharmaceuticals, spiked the price of Daraprim, a decades-old drug to prevent malaria and other infections, from $13.50 a tablet to a whopping $750.
However, while many might hope Shkreli got pinched for this price-raising scandal, his arrest is related to his management of hedge fund MSMB Capital Management and biopharmaceutical company Retrophin Inc. According to The New York Times, Shkreli was arrested in his Midtown Manhattan apartment, and corporate lawyer Evan L. Greebel was also arrested this morning in connection with Shkreli.
Shkreli started the biopharma company Retrophin during the time which he was running the hedge fund. Retrophin then adopted a controversial business strategy which is now being scrutinized — the company acquired neglected drugs, often used for rare diseases, and hiked the prices. For instance, the price of Thiola, a drug used to treat a disease that causes kidney stones, went up from $1.50 a pill to $30.
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The foul play sounds similar to Shkreli’s more recent scandal, but the cases are unrelated. However, the current charges are reportedly similar to those filed in a lawsuit against Shkreli in August by Retrophin. Back in September 2014, the company fired Shkreli as its chief executive, and in the lawsuit, they accused him of using the company as a “personal piggy bank” to pay off the outraged investors who lost money at his hedge fund, according to The NY Times.
“Shkreli was the paradigm faithless servant,” Retrophin’s complaint against Shkreli stated. “Starting sometime in early 2012, and continuing until he left the company, Shkreli used his control over Retrophin to enrich himself and to pay off claims of MSMB investors (who he had defrauded).”
The current charges relate to Shkreli’s management of the MSMB Capital Management hedge fund, and the indictment states that Shkreli made false representations to MSMB investors in order to draw in $3 million in investments.
These false representations followed MSMB’s devastating trading losses in 2011, but Shkreli sent out fabricated updates to investors to continue reaping profits. Additionally, Shkreli reportedly solicited $5 million from investors for a separate fund, MSMB Healthcare Management LP, but concealed his management of MSMB Capital. He also allegedly provided investors with an inflated valuation of his firm Retrophin during the time it was private, the indictment claims.
So what was lawyer Evan L. Greebel’s involvement? The indictment states that Shkreli and Greebel misappropriated $11 million in Retrophin assets through sham consulting deals and settlement agreements in order to pay back the MSMB fund investors.
Shkreli has denied the allegations, and US Attorney Robert Capers is scheduled to hold a press conference with officials from the FBI and the US Securities and Exchange Commission at noon EST to announce the charges.
Of course, as with all cases in the US Justice System, Shkreli remains innocent until proven guilty in the court of law. But no matter how the verdict unfolds, Martin Shkreli will live on as a modern day symbol of the abhorrent greed in the pharmaceutical industry.
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