It looks like there’s trouble in federal paradise for Martin Shkreli.
Shkreli is the infamous pharmaceutical CEO who earlier this fall was at the center of controversy when he raised the price of the drug Daraprim from $13.50 to $750. Daraprim is a FDA-approved antibiotic used for patients with a weakened immune systems including those with HIV/ AIDS, cancer, and malaria.
But Shkreli wasn’t arrested for raising the price of Daraprim.
Early this morning, federal agents arrested the thirty-two year old on seven counts related to securities fraud and conspiracy. Some describe his crimes as part of a “shell game” or “Ponzi scheme.” U.S. Attorney Robert Capers described Shkreli as being “engaged in multiple schemes to ensnare investors through a web of lies and deceit.”
Prosecutors in Brooklyn charged him with illegally taking stock from Retrophin Inc., a biotechnology firm he started in 2011, and using it to pay off debts from unrelated business dealings.
His financial problems began well before 2011.
It started back in 2006 when Shkreli co-founded his first hedge fund, Elea Capital Management, when he lost $3 million in investors’ money in less than a year. Then in July 2007, Lehman Brothers sued Shkreli, his fund, and several other investors for making bets that the market was going to fall. When the market did the opposite and actually climbed, the investors failed to pay Lehman Brothers. Lehman Brothers eventually won a $2.3 million judgment from Shkreli & co. for “failing to pay for a put option.”
By 2010, Shkreli opened up another hedge fund, MSMB Capital Management, taking in an additional $2.35 million from investors. Within two months, he lost half of the money and began using his clients’ money to pay for his personal expenses.
There is a conflicting take on who is the real baby Bernie Madoff aka Martin Shkreli. After Shkreli was inducted into Forbes’s coveted Forbes 3o Under 30 list, Forbes writer Matthew Herper described the pharmaceutical CEO and former hedge fund manager as embodying qualities of easily associated with the fictional three musketeers. Herper wrote,
[B]est known to investors as an activist who battled billionaires and entrenched drug industry executives through blog posts, shareholder letters, regulatory filings, and even an attempted hostile takeover.
The real irony is that Shkreli was only a true activist for his own self-indulgence and greed. He lobbied against several pharmaceutical companies awaiting FDA approval to protect his financial interests. Shkreli just so happened to be an investor in those companies and he was making a profit by short selling.
One can only think that Shkreli was throwing a Hail Mary pass by trying to deflect attention away from the ongoing federal investigation back in September when raised the price of Daraprim. Or maybe Shkreli just wanted just a little more time in the spotlight before his trial.
Photo credit: AP Photo/Craig Ruttle
Annis Sands is passionate about media + tech + innovation + art + education. She is also the co-creator of Ivy Startup Magazine (ivystartupmag.com).
Greed is one of the seven deadly sins.