Early Thursday morning, the so-called Pharma Bro, Martin Shkreli, the CEO of Turing Pharmaceuticals AG was arrested on federal securities fraud charges laid against him by the Securities and Exchange Commission (SEC).
“Over a five-year period, Shkreli is alleged to have perpetrated a series of frauds on investors in his hedge funds and Retrophin’s shareholders in order to cover up his poor trading decisions,” said Andrew J. Ceresney, Director of the SEC’s Division of Enforcement.
Shkreli came to notoriety after his company acquired the rights to the drug Daraprim, which is a drug used to prevent parasitic infections in HIV patients and pregnant women. Shkreli raised the price of the drug by 5000 percent from $13.50 a pill to $750.
The 32-year-old Shkreli was arrested in his Manhattan home related to fraud he allegedly committed at another drug company he founded Retrophin Inc. in 2011.
Shkreli allegedly took stock from Retrophin to pay for non-business related debts.
in September 2014, Shkreli was removed from the company by its board of directors. The company said that it had “serious concerns about his conduct.”
Retrophin filed a lawsuit against Shkreli in November 2014 for “gross mismanagement”. They allege that Shkreli turned the company into his personal bank, withdrawing millions in gross income and selling stock, all the while encouraging others to invest in the company.
Shkreli was using the income from Retrophin to cover loses he sustained as a hedge fund manager in 2011.
At that time, Shkreli made a $7 million investment in the drug Orexigin and lost all of it. His hedge fund went virtually bankrupt.
This past February, Shkreli defended himself against these allegations from Retrophin in a blog post.
“Every transaction I’ve ever made at Retrophin was done with outside counsel’s blessing,” he said.
A lawyer from New York, Even Greebel, was also arrested Thursday and has been accused of conspiring with Shkreli.
“Greebel’s alleged role in facilitating Shkreli’s fraud on Retrophin’s shareholders not only crossed legal boundaries but also grossly violated both his professional and ethical obligations,” said Andrew M. Calamari, Director of the SEC’s New York Regional Office.
After the public outcry that came with the Daraprim debacle, Shkreli originally promised to not go ahead with the 5000 percent price gouge, but he later reneged on that promise. Recently, Shkreli was asked if he would have done anything differently in the Daraprim case.
“I probably would have raised the price higher,” said Shkreli at a Forbes summit in New York this month. “My investors expect me to maximize profits.”
Shkreli has been asked to testify before Congress concerning allegations of price gouging, but said he would not appear unless subpoenaed.
[Bloomberg] [Raw Story] [FierceBiotech] [SEC]