Big Pharma CEO Martin Shkreli, dubbed by the BBC as “the most hated man in America”, was arrested early this morning after a 7-count indictment was filed against him by the Securities and Exchange Commission (SEC). Back on September 23rd, Sokolove Law reported on Shkreli’s overnight 5500% price hike of the drug Daraprim®, used to treat HIV, AIDS, and toxoplasmosis, a disease caused by a common parasite. Today, the “boy genius” is making headlines once again – but for a different reason.
Shkreli was arrested after federal agents stormed his midtown Manhattan residence on security fraud charges related to the biotech firm he’d founded in 2011, Retrophin Inc. Reports allege that Shkreli was illegally taking stock from Retrophin Inc. to pay off debts to other, unrelated companies and investors. Such debts are presumed to be related to Shkreli’s former company, MSMB Capital, losing millions of dollars.
In his short career, Shkreli has founded 4 companies, including Retrophin Inc., MSMB Capital, Turing Pharmaceuticals, and KaloBios Pharmaceuticals. Currently, he is CEO of both Turing and KaloBios. While Shkreli may have founded Retrophin and acted as their CEO for a time, he was ousted by its board in 2014 and then, subsequently, sued by the board, too. In their suit, they claimed that in deal-gone-bad with Merrill-Lynch, Shkreli lost the company over $7 Million.
Shkreli’s Meteoric Rise to Wall Street Fame & the Shady Track Record That Came with It
In his early 20s, fresh out of Baruch College, Shkreli founded the hedge fund MSMB Capital and quickly earned a reputation for being a “risk-taker” and a “genius”. While not well-known to the general public back then, the boyish CEO of Turing Pharmaceuticals soon rocketed into household infamy overnight as a living, breathing embodiment of unmitigated corporate greed. This, after he jacked the price of his company’s life-saving drug Daraprim® over 5500%, from $13.50 a pill to $750 a pill. His maneuver, done strictly for profit (Shkreli admitted as much, citing in an interview the drug’s “unprofitability”), was met immediately by a public firestorm of outrage.
Days after the giant swell of public derision was aimed right at him, Shkreli said to NBC: “I think it makes sense to lower the price in response to the anger felt by people.”
Great in theory – and what many thought was a victory for court of public opinion – but then he never did lower the drug’s price. And then 3 months passed.
After his flip-flop – the price of Daraprim remained at $750 a pill. When later called out on his non-action, and called, by Donald Trump “a spoiled brat,” Shkreli fired back: “[If I could do it all over again], I probably would have raised the price even higher.” Shkreli went on, “My investors expect me to maximize profits.”
Hilary Clinton, in a last-ditch effort to try and get the young Shkreli to re-lower the drug’s price, was dismissed by a public “LOL” on Shkreli’s Twitter feed.
The Security Fraud Charges Responsible for Shkreli Arrest This Morning
Though Shkreli made himself into a household name over the monstrous price hike of Daraprim, his arrest this morning had little to do with pharmaceutical drug prices. It does, however, have everything to do with securities fraud and illegal, backroom dealings.
The biotechnology firm that Shkreli founded, Retrophin, alleges that Shkreli was illegally taking company stock money to pay off personal debts.
The indictment claims Shkreli, in cahoots with other parties, devised and executed 3 fraudulent schemes between September 2009 and September 2014. The indictment also claims that Shkreli fraudulently duped investors to invest in 2 separate funds and then misappropriated the assets of Retrophin Inc. (a publically-traded company) in order to pay off his personal and unrelated debts.
The Case against Shkreli Has Been Mounting for Months
Today’s arrest echoes what former Retrophin investors have been saying for months. In August, Retrophin investors sued Shkreli for $65 Million, for misappropriation of company funds. Their suit alleges that Shkreli arranged for and carried out multiple transactions between 2 of the companies he owned – coaxing MSMB investors into deals with his other company Retrophin. Investors claim that Shkreli used his control over Retrophin to make himself even wealthier and to pay off personal debts to investors in MSMB, to whom he also committed fraud. In Bloomberg News response to the Retrophin lawsuit, Shkreli stated:
“The $65 million Retrophin wants from me would not dent me. I feel great. I’m licking my chops over the suits I’m going to file against them”
Retrophin also charges that Shkreli agreed to “payoff agreements” with a number of MSMB investors who lost money when the hedge fund went defunct. Their claim is that Shkreli paid off investors in false consulting agreements and others through unauthorized appropriations of both company stock and cash.
Needless to say, this is all a lot to take in for the 32-year-old who, in a gray hooded sweatshirt, was led out of his home in handcuffs by FBI agents earlier this morning. The son of Albanian and Croatian immigrants who were employed as janitors, Martin Shkreli has come a very long way from his extremely modest upbringing deep in working-class Brooklyn.
What today’s arrest tells us is that Shkreli, who has garnered the nicknames “Boy Genius”, “Pharma Bro”, and “The Bad Boy of Pharmaceuticals”, is that the public is fighting back – and in the case of unjust and dangerous business practices, the public can win.
In the series of unethical moves that Shkreli has made in his young career, it’s the American public and the sick who are left to suffer the most. Daraprim, the drug price of which Shkreli infamously raised by over $730 a pill, is a life-saving drug and the preferred treatment for toxoplasmosis, a disease which could prove deadly for unborn babies and Americans with poor immune systems due to HIV, AIDS – or cancer. If today’s allegations laid against him prove to be true, his meteoric rise to Wall Street notoriety followed by his incredible fall from grace will only affirm what Bloomberg has put so poignantly: “Shkreli both epitomizes the American dream and sullies it.”