After being arraigned on securities fraud charges, hedge fund founder turned pharmaceutical CEO/provocative asshole Martin Shkreli posted $5 million bail yesterday afternoon. The NY Times reports, "Mr. Shkreli, who had shown a great deal of self-confidence in recent television appearances before his arrest, looked a little shaken during the arraignment, occasionally twisting his head to look at the packed courtroom."
Federal prosecutors accused Shkreli, as well as his lawyer, of orchestrating a Ponzi scheme using the hedge fund and Shkreli's subsequent companies, to dupe investors out of their money. FBI Assistant Director-in-Charge Diego Rodriguez deemed it a "securities fraud trifecta of lies, deceit, and greed."
Among the allegations: that the 32-year-old had bragged to a hedge fund investor that there was $35 million in the fund's accounts, while there was only $700, and that Shkreli and attorney Evan Greebel continued to lie about the fund's success while trying to pay the investors with stock from Retrophin, which Shkreli started after the fund failed.
Michael Perino, the Dean George W. Matheson Professor of Law at St. John’s University School of Law, noted that it was "pretty unusual" for the prosecutors to charge the attorney, which allows them to undercut's Shkreli's possible defense that he "relied in good faith on my counsel," making this case more than the "plain vanilla securities fraud."
Shkreli left Retrophin earlier this year, and founded Turing Pharmaceuticals, reaching new heights of public notoriety after raising the price of Daraprim, a drug used to treat rare, life-threatening cases of toxoplasmosis, from $13.50 a pill to $750 a pill. He insisted it was necessary to allow Turing to develop research and development about drugs and to educate physicians. The U.S. Attorney's office said yesterday it was unclear if Shkreli did so to raise money to fight a $65 million civil lawsuit from Retrophin. (It's worth noting that many pharmaceutical companies raise the prices of their much-needed drugs, though maybe not as steeply as Turing did.)
According to the Wall Street Journal, "The [Retrophin] lawsuit described a vengeful executive, accusing Mr. Shkreli of threatening a former employee of his MSMB hedge fund and the former employee’s family, including contacting two of the former employee’s children on Facebook and telling one that their father had stolen $3 million. According to the lawsuit, Mr. Shkreli also threatened the former employee’s wife, writing in a letter, 'I hope to see you and your four children homeless and will do whatever I can to assure this.'"
Retrophin says Shkreli's arrest "vindicated" their decision to replace him and that they are cooperating with the authorities.
Both Shkreli and Greebel posted bail and must surrender their passports. Shkreli's $5 million bail was secured by his father and brother and Greebel's $1 million bail was secured by his wife and mother. Shkreli has turned to Twitter:
Glad to be home. Thanks for the support.
— Martin Shkreli (@MartinShkreli) December 18, 2015
It's unclear if he'll be resuming livestreams to creepily chat with teenagers or finally listen to that Wu-Tang Clan album, but a statement from Shkreli's spokesperson reads, "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."
Greebel has not released a statement, but a WSJ article notes he had been part of a team helping the Winklevoss twins start a bitcoin exchange fund.
Bloomberg News offers two now-prescient quotes: Senator Susan Collins (R-Maine) said during a Senate hearing last week, "Some of these companies seem to act more like hedge funds than traditional pharmaceutical companies," and George Scangos, CEO of biotechnology giant Biogen Inc., said in an interview, "Turing is to a research-based company like a loan shark is to a legitimate bank."