Drug price gouger Shkreli goes on trial for fraud
Prosecutors allege he ran hedge fund as though it were a ‘Ponzi-like’ scheme
When Martin Shkreli gained international notoriety for raising the price of an Aids and cancer medicine by 5,000 per cent, he was quick to point out he had done nothing illegal.
That might be true but federal prosecutors allege he did break the law by defrauding investors in a hedge fund before he became known for price gouging, and on Monday he is due to stand trial in Brooklyn, New York.
Mr Shkreli’s alleged fraud is small beer by the standards of other well-known cases, and might have gone unnoticed by the world’s media were it not for his actions as chief executive and founder of Turing Pharmaceuticals.
In September 2015, Turing bought a decades-old drug, Daraprim, and promptly hoisted the price from $13.50 to $750 a pill — putting it out of reach for some of the Aids and cancer patients who needed it to fend off a deadly type of infection.
The public outcry was deafening and echoed around the world, drawing Mr Shkreli a rebuke from then Democratic presidential candidate Hillary Clinton and catapulting the issue of high drug prices to the forefront of the 2016 US election campaign.
Three months later, Mr Shkreli was woken by the Federal Bureau of Investigation on a rainy December morning and frogmarched to a Brooklyn courthouse, where he was charged with defrauding his investors to the tune of $11m by running his MSMB hedge fund as though it were a “Ponzi-like” scheme.
He has filled much of the intervening time by live-streaming his life on YouTube from his apartment in midtown Manhattan, sometimes for more than 10 hours at a time.
Viewers can pepper him with questions, watch him play online chess, or even take lessons in chemistry and, somewhat ironically, the basics of investing and finance.
If a member of the audience asks about the trial, Mr Shkreli usually demurs, heeding the advice of his lawyer Benjamin Brafman, an attorney who is no stranger to high-profile cases, having represented rapper Sean “P Diddy” Combs and Dominique Strauss-Kahn, former head of the International Monetary Fund.
However, on occasion, he errs from the script and confidently predicts he will prevail.
He was just as bullish when he sat down for Lunch with the FT in November, suggesting that his notoriety might even help sway the jury and comparing his case to that of OJ Simpson.
“I have this fringe theory that I’ve sort of stress-tested a little bit — the more polarising and popular a case is, the more likely an acquittal,” he said at the time.
The prosecution will allege that Mr Shkreli covered up heavy losses at two hedge funds he ran between 2009 and 2011 and then plundered assets from Retrophin, a drugmaker he founded, to pay back investors.
Mr Shkreli has plead not guilty.
In comments made during the November interview with the FT, which have yet to be published, Mr Shkreli said the trial would reveal that “a lot of what I did was based on trust . . . and not necessarily dotting I’s and crossing T’s”.
The government alleges that Mr Shkreli told his hedge fund investors that the vehicle was solvent when it was not. He counters that he eventually transferred Retrophin stock to the fund which “ended up working out great and the punters made a fortune”.
He added: “The [government] said, ‘you didn't transfer that stock until later’. I said, ‘well, I made the promise to transfer’.
“And it worked out in the end, most importantly. To me that was what was important.”