The CEO of Turing Pharmaceuticals, Martin Shkreli was arrested this morning and taken to jail for allegedly committing securities fraud.
The world was stunned in September by the arrogant behavior of Turing Pharmaceuticals CEO Martin Shkreli. The life-enhancing AIDS drug known as Daraprim was priced at about $13.50 per tablet but shot up to $750 per pill, overnight. He gawked at critics when questioned about his decision during interviews and was unapologetic about his actions. For months, he refused to issue a price reversal, even at the expense of the lives of AIDS patients who depend on the drug, but could not afford the high-end price tag.
Martin Shkreli was escorted from his New York apartment by authorities, in a hoodie and handcuffs along with his attorney Evan Greebel. Both are charged with fraud and are being arraigned in a local court in Brooklyn, New York. The FBI arrested Shkreli and Greebel on 7 counts of fraud, in conjunction with other companies he headed.
Ironically, Shkreli was not arrested for raising the price of Daraprim. He and his attorney are being held in custody for allegedly stealing from his former company, Retrophin and defrauding investors through his failed hedge fund, MSMB Capital Management. In the wake of today’s arrests, Retrophin’s stock price has plummeted (RTRX – Nasdaq) to $21.11 per share. Retrophin recently replaced Shkreli due to concerns about his conduct.
U.S. Attorney Robert Capers spoke at a press conference earlier, outlining the charges against the partners in crime. Shkreli had been part of an ongoing investigation by the SEC and the FBI. According to the Securities and Exchange Commission’s press release issued a few hours ago: “The SEC alleges that Martin Shkreli misappropriated money from two hedge funds he founded and made material misrepresentations to investors among other widespread misconduct.”
Shkreli allegedly committed fraud using a Ponzi-like scheme, in which he illegally used $11M in stock from the pharmaceutical company, Retrophin, where he was the CEO and used the funds to pay off his bad debts. Capers said that Shkreli was using Retrophin as his “personal piggy bank” to fund his lavish lifestyle and his Ponzi scheme. Martin Shkreli’s attorney was part of the alleged scam, which U.S. Attorney Robert Capers referred to today as “a trifecta of lies, deceit and greed.” Evan Greebel was partner in the New York firm Katten Muchin Rosenman LLP.
Today’s arrest is a reminder of the hubris of fraudsters like Bernard Madoff, who was indicted on December 1, 2008 for similar activities. Other big bank CEOs and hedge fund managers pocketed billions of dollars from hedging against the market, which was the catalyst of the 2007/2008 crash and subsequent crisis. The same heads of these big banks received over $700B in bailouts from the Federal Reserve, funded by American taxpayers.
Capers issued a strong warning during this morning’s press conference to CEOs, hedge fund managers and others in the financial industry who commit fraud. His words were sharp, saying “there will be efforts to uncover your schemes, no matter how long it takes.”