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 yesterday 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. (https://www.youtube.com/watch?v=I-4D6yj-cR4)
Shkreli, who is chief executive officer of Turing Pharmaceuticals and KaloBios Pharmaceuticals Inc, was charged in a federal indictment filed in Brooklyn relating to his management of hedge fund MSMB Capital Management and biopharmaceutical company Retrophin Inc. 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.
Shkreli was charged with securities fraud, securities fraud conspiracy and wire fraud conspiracy. The maximum sentence for the top count is 20 years in prison.
“Mr. Shkreli is confident that he will be cleared of all charges filed by the U.S. Attorney’s Office for the Eastern District of New York (EDNY) and the Securities & Exchange Commission,” a representative said in a statement late yesterday.
“(He) also strongly denies the charges regarding the MSMB entities, which involve complex accounting matters that the EDNY and SEC fail to understand,” the representative added.
The indictment, the result of an ongoing investigation, also charged Evan Greebel, a former partner at law firm Katten Muchin Rosenman who was Retrophin’s outside counsel. Greebel, 42, was also arrested on Thursday.
Shkreli and Greebel entered pleas of not guilty through their lawyers.
Both were also sued in a related lawsuit by the U.S. Securities and Exchange Commission, which also named New York-based hedge fund MSMB Capital Management as a defendant.