Categories: Media Moves

Coverage: Pharma CEO Martin Shkreli arrested

He attracted the ire of both the media and the public just months ago, and it seems the year continues to get worse for Turning Pharmaceuticals CEO Martin Shkreli. On Thursday morning, federal officials arrested Shkreli on multiple securities and wire fraud charges for his part in what prosecutors called a “Ponzi scheme.”

None of Shkreli’s charges are connected to his time with Turning.

Gillian Mohney of ABC News summed up the day’s headlines:

Turing Pharmaceuticals CEO and former hedge fund manager Martin Shkreli, who was heavily criticized for raising the price of a drug used to treat a life-threatening infection by more than 4,000 percent, is facing multiple charges of securities and wire fraud in what federal prosecutors call a “Ponzi scheme” that stretched on for years.

Robert Capers, United States Attorney for the Eastern District of New York, told reporters today that Shkreli allegedly defrauded investors in two hedge funds, MSMB Capital and MSMB Healthcare, and also plundered Retrophin, the biopharmaceutical company he ran as its CEO, in an effort to pay back debts related to the now-defunct hedge funds.

Prosecutors allege that Shkreli lost all of the investments in MSMB Capital but continued to provide inflated and false performance updates to its investors. According to the indictment, Shkreli told one investor that the value of his $1.25 million investment was now worth slightly more than $1.3 million, even though MSMB Capital had ceased trading almost a year before and had no assets.

“Shkreli essentially ran his company like a Ponzi scheme,” Capers told reporters, explaining that Shkreli then allegedly concealed the collapse of MSMB Capital from potential clients in order to get them to invest in MSMB Healthcare. Capers explained that Shkreli next proceeded to allegedly use the money invested in MSMB Healthcare to pay off his previous debts. He is also accused of creating fraudulent transactions of money out of Retrophin in order to pay off personal and professional debts. Prosecutors say, as a result, Retrophin and its investors lost in excess of $11 million.

“As alleged, Martin Shkreli engaged in multiple schemes to ensnare investors through a web of lies and deceit,” Capers told reporters.

Renae Merle and Michael Miller of The Washington Post followed along as the day unfolded:

At his arraignment Thursday afternoon, Shkreli pleaded not guilty. He was released on $5 million bond. Turing and Shkreli’s attorneys did not return emails and calls seeking comment.

Evan Greebel, former outside counsel to Retrophin, was also arrested and has been charged with helping Shkreli with his fraudulent schemes.

Retrophin said its board removed Shkreli more than a year ago because of serious concerns about his conduct. In an Aug. 17 securities filing, the company said it had filed suit against its former chief executive.

“Shkreli was the paradigm faithless servant,” the filing 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).”

On Thursday, following Shkreli’s arrest, Retrophin issued a statement:

“Following his departure, the company authorized an independent investigation of Mr. Shkreli’s conduct, publicly disclosed its findings, and has fully cooperated with the government investigations into Mr. Shkreli. Until we have had the opportunity to review the charges against Mr. Shkreli, we cannot comment further.”

Retrophin said it has since added new members to its board and management team, implemented new financial controls and “further developed its pipeline of promising drugs for patients with rare diseases while steadily improving its operating performance.”

The Chicago Tribune team explained the penalties Shkreli could face and examined his most recent business tactics:

A spokesman for Shkreli released a statement saying he denies the charges and “expects to be fully vindicated.”

“It is no coincidence that these charges, the result of investigations which have been languishing for considerable time, have been filed at the same time of Shkreli’s high-profile, controversial and yet unrelated activities,” said spokesman Craig Stevens.

In September, Shkreli was widely vilified after a drug company he founded, Turing Pharmaceuticals, spent $55 million for the U.S. rights to sell a medicine called Daraprim and promptly raised the price from $13.50 to $750 per pill.

The 62-year-old drug is the only approved treatment for toxoplasmosis, a rare parasitic disease that mainly strikes pregnant women, cancer patients and AIDS patients.

The move sparked outrage on the presidential campaign trail and helped prompt a Capitol Hill hearing on drug prices. Headlines called the Brooklyn-born Shkreli such thing as “America’s most hated man,” the “drug industry’s villain” and “biotech’s bad boy” — and those were just some of the more printable names.

Hillary Clinton called it price-gouging and said the company’s behavior was “outrageous.” Donald Trump called Shkreli “a spoiled brat.” Bernie Sanders returned a donation from Shkreli.

Prosecutors said the investigation that led to Shkreli’s arrest dated back to last year, before the furor over the drug-price increase.

Shkreli defended the increase by saying that insurance and other programs would enable patients to get the drug and that the profits would help fund research into new treatments.

But he also made an unapologetic business-is-business argument for the price jump. In fact, he recently said he probably should have raised it more.

Karen Workman and Patrick Laforge of The New York Times delved into some of Shkreli’s recent patterns of behavior, including recording hours of bizarre live-streams:

About a month ago, Martin Shkreli, the pharmaceutical entrepreneur who was arrested on Thursday, began live-streaming himself on YouTube, sometimes for 10 hours or more at a time, as he worked, played video games, strummed a guitar and, occasionally, while he slept.

He would also chat with his audience, defending himself to critics upset about accusations of drug price gouging and seeming to taunt fans of Wu-Tang Clan asking him to play the sole copy of the group’s latest album, which he reportedly purchased at auction. (So far, he had yet to play the music on the stream.)

The live streams are preserved on his YouTube account. There are boring moments (Mr. Shkreli sleeping) and some odder ones, such as Mr. Shkreli debating drug prices and politics with a group of students apparently from his alma mater, Hunter College High School in New York.

That exchange, on Monday, began when a girl who identified herself as a senior at Hunter connected with him via Skype.

Demonstrators protested outside of the New York Activists protesting in October at the offices of Turing Pharmaceuticals, whose chief, Martin Shkreli, was arrested on Thursday.

Martin Shkreli is the founder and chief executive of Turing Pharmaceuticals, which raised the price of the drug Daraprim to $750 a tablet from $13.50.Drug Goes From $13.50 a Tablet to $750, OvernightSEPT. 20, 2015

In their conversation, which starts a little less than four hours into the recorded video, Mr. Shkreli told her that he was planning to dominate the rap industry, have Hunter renamed for himself and bail a rapper out of jail. He talked about his admiration for Bill Gates, who was once “one of the most hated people in the world.”

And he told her how he did not like Republicans because a Mitt Romney fund-raiser “was the most depressing night I’ve ever had.”

The conversation was at times bizarre and disjointed.

Meg Garner

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